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Max Weber

ECONOMY
AND

SOCIETY '«•»• i

r+.-K
Y.3*.

AN OUTLINE OF INTERPRETIVE 'SOCIOLOGY

Edited by Guenther Roth
and Ckus Wittich

University of California Press
Berkeley • Lofe v Angeles • London

University of California Press, Berkeley and Los Angeles. California

University of California Press, Ltd., London, England

or by any means, electronic or mechanical, including photocopying, recording, or by any

information storage and retrieval system, without permission in writing from the publishers.

Library of Congress Catalog Card Number; 74-81443
ISBN; 0-520-02824-4 (cloth)
0-510-03500-3 (paper)

Printed in the United States of America

2 3 4 5 6 7 8 9

Economy and Society is a translation of Max Weber, Wirtschaft und Gesellsckaft.
Grundriss der verstehenden Soziologie, based on the 4th German edition, Johannes
Winckelmann (ed.), Tubingen; J. C. B. Mohr (Paul Siebeck), 1956, pp. 1-550,
559-822, as revised in the 1964 paperback edition (Kfiln-Berlin: Kiepenheuer &
Witsch), with appendices from Max Weber, Gesammelte Aufsatze zw Wissen-
schaftslehre, 2nd rev. edition, Johannes Winckelmann (ed,), Tubingen; J. C. B.
Mohr (Paul Siebeck), 1951, pp. 441-467 (selected passages), and Max Weber,
Gesammelte polttische Schriften, and expanded edition, Johannes Winckelmann (ed.),
Tubingen; J. C. B. Mohr (Paul Siebeck), 195S, pp. 294-394.

The exclusive license to make this English edition has been granted to the University
of California Press by the German holder of rights, J. C. B. Mohr (Paul Siebeck),
Tubingen.

The English text includes (with revisions and with addition of notes) material
previously published and copyrighted by these publishers;

Beacon Press:

Ephraim Fischoff, trans., The Sociology of Religion (Boston: Beacon Press, 1963),
pp. r-274. Copyright © 1963 by Beacon Press. Reprinted by arrangement with
Beacon Press.

Oxford University Press:

Hans Gerth and C- Wright Mills, trans, and eds., From Max Weber: Essays in
Sociology (New York; Oxford University Press, 1946), pp. ^9-244, 253-262. Copy-
right 1946 by Oxford University Press, Inc. British Commonwealth rights by Jloutledge
and Kegan Paul Ltd. Reprinted by permission.

The Free Press of Glencoe:

Ferdinand Kolegar, trans., "The Household Community" and "Ethnic Groups," in
Talcott Parsons et al., eds., Theories of Society (New York: The Free Press of Glencoe,
1961)1 vol. r, pp. 296-298, 302-309, Copyright © 1961 by The Free Press of Glencoe.
Reprinted by permission.

Talcott Parsons, ed. (A. M. Henderson and T. Parsons, trans.), The Theory of Social
and Economic Organization (New York: The Free Press of Glencoe, 1964; originally
published by Oxford University Press, 1947), pp. 87-423. Copyright 1947 by The
Free Press of Glencoe. Reprinted by permission.

Harvard University Press:

Max Rhein stein, ed. (Edward Shils and Max Rheinstein, trans.), Max Weber on Law
in Economy and Society (20th Century Legal Philosophy Series, Vol. VI; Cam-
bridge, Mass.; Harvard University Press, 1954), pp. 1 1-348. Copyright, 1954 by the
President and Fellows of Harvard College. Reprinted by permission.

Correspondence about these sections of the English translation should be directed to the
above publishers. See editors' preface for details about their location in this edition.

Translators: EPHRAIM FISCHOFF
HANS GERTH
A. M. HENDERSON
FERDINAND KOLEGAR
C. WRIGHT MILLS
TALCOTT PARSONS, ~
MAX RHEINSTEIN
GUENTHER ROTH
EDWARD SHILS
CLAUS W1TTICH

SUMMARY CONTENTS

LIST OF ABBREVIATIONS xxv

VOLUME i

PREFACE TO THE 1978 RE-ISSUE xtox

PREFACE xxxi

INTRODUCTION by Guenther Roth xxxiii

PART ONE: CONCEPTUAL EXPOSITION

I. Basic Sociological Terms 3
II. Sociological Categories of Economic Action 63

III. The Types of Legitimate Domination 112

IV, Status Groups and Classes 302

PART TWO: THE ECONOMY AND THE- ARENA OF
NORMATIVE AND D£ FACTO ROWERS

I. The Economy and Social Norms 311
II. The Economic Relationships of Organized Groups 339 i

III. Household, Neighborhood and Kin Group 356

IV, Household, Enterprise and Oikos 370 \
V. Ethnic Groups 385 t

VI. Religious Groups (The Sociology of Religion) 399
VII. The Market: Its Impersonality and Ethic (Fragment) 635

VOLUME 2

VIII. Economy and Law (The Sociology of Law)
IX. Political Communities 901
X. Domination and Legitimacy
XI. Bureaucracy 956

641

941

[v]

V I SUMMARY CONTENTS

XII. Patriaidialism and Patrimonialism 1006

XIII. Feudalism, Standestaat and Patrimonialism 1070

XIV. Charisma and Its Transformation mi
XV. Political and Hierocratic Domination 11 58

XVI. The City (Non-Legitimate Domination!) 121 2

APPENDICES

I. Types of Social Action and Groups 1375
II. Parliament and Government in a Reconstructed Germany 1 38 1

INDEX -

Scholars tit
Historical Names v
Subjects xi

ANALYTICAL CONTENTS

LIST OF ABBREVIATIONS xxv

VOLUME i

PREFACE TO THE 1978 RE-ISSUE xxix

PREFACE xxxi

INTRODUCTION by Guenther Roth xxxiii

1. A Claim xxxiii

2. Sociological Theory, Comparative Study and Historical Explanation xxxv

3. The Legal Forms of Medieval Trading Enterprises xl

4. Economic and Political Power in Ancient Germanic History xlii ^

5. The Roman Empire and Imperial Germany xlvi

6. The Economic Theory of Antiquity 1

7. A Political Typology of Antiquity liv

8. Weber's Vision of the Future and His Academic Politics Ivii

9. The Planning of Economy and Society brii

10. The Structure of Economy and Society lxvi

I. PART TWO: THE EARLIER PART lxvii

Ch. I: The Economy and Social Norms — On Stammler lxvii

Ch. II: On Marx, Michels and Sombart Ixix

Chs. III-V: The Relatively Universal Groups Ixxiii

Ch. VI: The Sociology of Religion Ixxvi

Ch. VII: The Market, Its Impersonality and Ethic lxxx

Ch. VIII : The Sociology of Law bood

Ch. IX: Political Community and State lxxxiv

Chs. X-XVI: The Sociology of Domination Ixxxviii

(a) The Theory of Modern Democracy xcj

(b) The Dimensions of Rulership xriii
Cc) The Terminology of Domination xciv

(d) The City: Usurpation and Revolution xcvii

II. PART ONE: THE LATER PART C

11. Weber's Political Writings civ

12. On Editing and Translating Economy and Society cvii

13. Acknowledgements ex

[vii]

VIII ANALYTICAL CONTENTS

Pan One: CONCEPTUAL EXPOSITION

Chapter I
BASIC SOCIOLOGICAL TERMS 3

Prefatory Note 3
1 . The Definitions of Sociology and of Social Action 4

a. Methodological Foundations 4

b. Social Action 22

-. Types of Social Action 24

3. The Concept of Social Relationship 26

4. Types of Action Orientation: Usage, Custom, Self-Interest 29

5. Legitimate Order 31

6. Types of Legitimate Order: Convention and Law 33

7. Bases of Legitimacy: Tradition, Faith, Enactment 36

8. Conflict, Competition, Selection 38

9. Communal and Associative Relationships 40

10. Open and Closed Relationships 43

11. The Imputation of Social Action: Representation, and Mutual
Responsibility 46

1 2. The Organization 48

13. Consensual and Imposed Order in Organizations 50

14. Administrative and Regulative Order 51

15. Enterprise, Formal Organization, Voluntary and Compulsory
Association 52

16. Power and Domination 53

17. Political and Hierocratic Organizations 54

Notes ;6

Chapter 11
SOCIOLOGICAL CATEGORIES QF ECONOMIC ACTION 63

Prefatory Note 63

1. The Concept of Economic Action 63

2. The Concept of Utility 68

3. Modes of the Economic Orientation of Action 69

4. Typical Measures of Rational Economic Action 7.1

5. Types of Economic Organizations 74

6. Media of Exchange, Means of Payment, Money 75

7. The Primary Consequences of the Use of Money. Credit 80

8. The Market 82

9. Formal and Substantive Rationality of Economic Action 85

10. The Rationality of Monetary Accounting.' Management anc> Budgeting 86

1 1 . The Concept and Types of Profit-Making. The Role of Capital 90

12. Calculations in Kind 100

j 3. Substantive Conditions of Formal Rationality in a Money Economy 107

Analytical Contents I X

14. Market Economies and Planned Economies 109

1 5 . Types of Economic Division of Labor 114

16. Types of the Technical Division of Labor 118

17. Types of the Technical Division of Labor — (.Continued') 120

1 8. Social Aspects of the Division of Labor 1 22

19. Social Aspects of the Division of Labor — (Continued') 12;

20. Social Aspects of the Division of Labor: The Appropriation of the
-Material Means of Production 130

21. Social Aspects of the Division of Labor: The Appropriation of
Managerial Functions 136

22. The Expropriation of Workers from the Means of Production 1 3 7

23. The Expropriation of Workers from the Means. of Production
— (.Continued) 139

24. The Concept of Occupation and Types of Occupational Structure 140
24a. The Principal Forms of Appropriation and of Market Relationship 144

25. Conditions Underlying the Cakulability of the Productivity of Labor 1 50

26. Forms of Communism 153

27. Capital Goods and Capital Accounting 1 54 ■

28. The Concept of Trade and Its Principal Forms 156

29. The Concept of Trade and Its Principal Forms — (Continued) 1 57
29a. The Concept of Trade and Its Principal Forms — (Concluded) 1 59

30. The Conditions of Maximum Formal Rationality of Capital Accounting 161

3 1 . The Principal Modes of Capitalistic Orientation of Profit-Making 1 64

32. The Monetary System of the Modern State and the Different Kinds of
Money: Currency Money 166

33. Restricted Money 174

34. Note Money 176

35. The Formal and Substantive Validity of Money 178

36. Methods and Aims of Monetary Policy 180

36a. Excursus: A Critical Note on the "State Theory of Money" 184

37. The Non-Monetary Significance of Political Bodies for the Economic
Order 193

38. The Financing of Political Bodies 194

39. Repercussions of Public Financing on Private Economic Activity 199

40. The Influence of Ecopjroic Factors on the Formation of Organizations 201

41. The Mainspring of Economic Activity 202

Notes 206

Chapter III ,

*" <t
THE TYPES OF LEGITIMATE DOMINATION 212

I, THE BASIS OF LEGITIMACY 212

i. Domination and Legitimacy 212

2. The Three Pure Types of Authority 215

U. LEGAL AUTHORITY WITH A BUREAUCRATIC ADMINISTRATIVE

STAFF 217

3. Legal Authority: The Pure Type 217

4. Legal Authority; The Pure Type — (Continued) 220

5. Monocratic Bureaucracy 223

X ANALYTICAL CONTENTS

Hi. TRADITIONAL AUTHORITY 226

6. The Pure Type 226

7 The Pure Type— (Continued) 228

7 a. Gerontocracy, PatriarchaMsm and Patrimonialism 231

8 Patrimonial Maintenance: Benefices and Fiefs 235

9 Estate-Type Domination and Its Division of Powers 23b
9 a. Traditional Domination and the Economy 237

iv, CHARISMATIC AUTHORITY 24I

10. Charismatic Authority and Charismatic Community 241

V. THE ROUTINIZATION OP CHAHISMA 246

1 1 . The Rise of the Charismatic Community and the Problem of

Succession 246 .

12 Types of Appropriation by the Charismatic btatt 249

r 2a. Status Honor and the Legitimation of Authority 25 1

Vt. FEUDALISM 255

jzb Occidental Feudahsm and Its Conflict with Patrimoniahsm 255

1 2c. Prebendal Feudalism and Other VarianK 259

,3. Combinations of the Different Types of Authority 262

VM..THB TRANSFORMATION OF CHARISMA IN A DEMOCRATIC
DIRECTION 266
,4. Democratic Legitimacy, Plebiscitary Leadership and Elected
Officialdom 266

■ viii. COLLBGIALITY AND THE DIVISION OF POWERS VfX

15 Types ofColfcgiality and of the Division of Powers 271

16 The Functionally Specific Division of Powers 282

I;! The St^7the1political Separation of Powers to the Economy 283

tX. PARTIES 284

-18. Definition and Characteristics 284

X DIRECT DEMOCRACY AND REPRESENTATIVE ADMINISTRATION 28 9

10. The Conditions of Direct Democracy and of Administration by

Notables 289
20. Administration by Notables 290

M. REPRESENTATION 2£2

21 The Principal Forms and Characteristics 292

22'. Representation by the Agents of Interest Groups 297

Notes 299

Chapter IV
STATUS GROUPS AND CLASSES

302

Class Situation and Class Types 302

Property Classes 303

Commercial Classes 304

Social Class 305

Status and Status Group (Stand) 305

Notes 307

Analytical Contents

Part Two: THE ECONOMY AND THE ARENA
OF NORMATIVE AND DE FACTO POWERS

Chapter 1
THE ECONOMY AND SOCIAL NORMS 31 1

1 . Legal Order and Economic Order 311

a. The Sociological Concept of Law 311

b. State Law and Extra-State Law 316

2. Law, Convention, and Custom 319

a. Significance of Custom in the Formation of Law 319

b. Change Through Inspiration and Empathy 321

c. Borderline Zones Between Convention, Custom, and Law 313

3. Excursus in Response to Rudolf Stammler 325

4. Summary of the Most General Relations Between Law and Economy 333

Notes 337

Chapter 11
THE ECONOMIC RELATIONSHIPS OF ORGANIZED GROUPS

339

Economic Action and Economically Active Groups 339

Open and Closed Economic Relationships 341

Group Structures and Economic Interests: Monopolist versus

Expansionist Tendencies 344

Five Types of Want Satisfaction by Economically Active Groups

Effects of Want Satisfaction and Taxation on Capitalism and

Mercantilism 351

Notes 3J4

348

Chapter III
HOUSEHOLD, NEIGHBORHOOD AND KIN CROUP

1. The Household; Familial, Capitalistic and Communistic Solidarity 356
». The Neighborhood: An Unsentimental Economic Brotherhood 360

3. The Regulation of Sexual Relations in the Household 363

4. The Kin Group and Its Economic Effects on the Household 365

Notes 369

356

Chapter IV

HOUSEHOLD, ENTERPRISE AND OIKOS

^ I. The Impact of Economic, Military and Political Groups on joint
Property Law and Succession in the Household 370

370

XII ANALYTICAL CONTENTS

2. The Disintegration of the Household: The Rise of the Calculative
Spirit and of the Modern Capitalist Enterprise 375

3. Tli e A! terna rive Development: The Oikos 381

Notes 384 \

Chapter V

ETHNIC GROUPS 3 8 5

1. "Race" Membership 385 '

2. The Relief in Common Ethnicity: Its Multiple Social Origins and
Theoretical Ambiguities 387

3. Tribe and Political Community: The Disutility of the Notion of
"Ethnic Group" 393

4. Nationality and Cultural Prestige 395

Notes 398

Chapter VI
RELIGIOUS GROUPS QTHE SOCIOLOGY OF RELIGION') 399

I, THE ORIGINS OF RELIGION 399

i . The Original This-Worldly Orientation of Religious and Magical

Action 399
a. The Belief in Spirits, Demons, and the Soul 401

3. Naturalism and Symbolism 403

4. Pantheon and Functional Gods 407

i. Ancestor Cult and the Priesthood of the Family Head 41 1

6. Political and Local Gods 41a

7. Universalism and Monotheism in Relation to Everyday Religious Needs
and Political Organization 415

Notes 4*o

it. MAGIC AND REUCION 422

: . ,\l.!!;k-3l Coercion versus Supplication, Prayer and Sacrifice 422

. 1 ho Differentiation of Priests from, Magicians 415

'. Pic-airtions to Success and Failure of Gods and Demons 427

.). }.:iiu,it Deities and Increasing Demands Upon Them 429

■>. :\!;iy'..;tl Origins of Religious Ethics and the Rationalization of Taboo 432

fi. Talnjo Norms: Totemism and Commensalism 433

7. ( ';istc Taboo, Vocational Caste Ethics, and Capitalism 435

3. Prom Magical Ethics to Conscience, Sin and Salvation 437

\otcs 439

Hi. TH^ prophet 439

1. Prophet versus Priest and Magician 439

2. Prophet and Lawgiver 442

3. Prophet and teacher of Ethics 444

4. Myiiagogue and Teacher 446

5. Fthioil and Exemplary Prophecy 447 ~

6. 1 lit- Nature of Prophetic Revelation; The World As a Meaningful
1 utahty 450

Notes

Analytical Contents XIII

iv. THE CONGREGATION BETWEEN PROPHET AND PRIEST 452

1. The Congregation: The Permanent Association of Laymen 452

2. Canonical Writings, Dogmas and Scriptural Religion 457

3. Preaching and Pastoral Care as Results of Prophetic Religion 464

Notes 467

V. THE RELIGIOUS PROPENSITIES OF PEASANTRY, NOBILITY
AND BOURGEOISIE 468

i . Peasant Religion and Its Ideological Glorification 468

2. Aristocratic lrreligion versus Warring for the Faith 47 2

3. Bureaucratic lrreligion 476

4. Bourgeois Religiosity and Economic Rationalism 477

Notes 480

VI, THE RELIGION OF NON-PRIVILEGED STRATA 48 1

i , The Craftsmen's Inclination Toward Congregational and Salvatktt
Religion 481 >

2. The Religious Disinclinations of Slaves, Day Laborers and the Modem

Proletariat 484

3. The Devolution of Salvation Religion from Privileged to
N on -Privileged Strata 486

4. The Religious Equality of Women Among Disprivileged Strata 488

5. The Differential Function of Salvation Religion for Higher and Lower
Strata: Legitimation versus Compensation 490

6. Pariah People and Ressentiment: Judaism versus Hinduism 492

Notes 499

VH. INTELLBCTUALISM, INTELLECTUALS, AND SALVATION
RELIGION 500

1. Priests and Monks as Intellectualist Elaborators of Religion 50a

2. High-Status Intellectuals as Religious Innovators 502

3. Political Decline of Privileged Strata and Escapism of Intellectuals 503

4. The Religious Impact of Proletarian, Petty-Bourgeois and Pariah
Intellectual ism 507

;. The Intellectual ism of Higher- and Lower-Ranking Strata in Ancient

Judaism 508

6. The Predominance of Anti-Intellectualist Currents in Early
Christianity 510

7. Elite and Mass Intellectualism in Medieval Christianity 513

8. Modern Intellectual Status Groups and Secular Salvation Ideologies 515

Notes 5 1 7

Vlti. THEODICY, SALVATION, AND REBIRTH 5 18

i. Theodicy and Eschatology 518

2. Predestination and Providence 522

3. Other Solutions of Theodicy: Dualism and the Transmigration of .
the Soul 523

4. Salvation: This-Worldly and Other-Worldly 516

Notes 529

^^^^^mam

XIV ANALYTICAL CONTENTS

tX. SALVATION THROUGH THE BELIEVER'S EFFORTS 529

i. Salvation Through Ritual 529

2. Salvation Through Good Works 531

3. Salvation Through Self -Perfection 534

4. The Certainty ofGrace and the Religious Virtuosi 538

Notes 541

X. ASCETICISM, MYSTICISM AND SALVATION 54 1

i . Asceticism : World- Rejecting or Inner-Worldly 54 1

2, Mysticism versus Asceticism 544

3. The Decisive Differences Between Oriental and Occidental Salvation 551

Notes 556

Xi. SOTERIOLOGY OR SALVATION FROM OUTSIDE 5J7

i. Salvation Through the Savior's Incarnation and Through
Institutional Grace 557

2. Salvation Through Faith Alone and Its Anti-Intellectual Consequences 563

3. Salvation Through Belief in Predestination 572

Notes 576

Xti. RELIGIOUS ETHICS AND THE WORLD: ECONOMICS 576

i. Worldly Virtues and the Ethics of Ultimate Ends 576

2. Familial Piety, Neighborly Help, and Compensation 579

3. Alms-Giving, Charity, and the Protection ot the Weak 581

4. Religious Ethics, Economic Rationality and the Issue of Usury 583

Notes 589

Mil. RELIGIOUS ETHICS AND THE WORLD: POLITICS 590

i . From Political Subordination to the Anti-Political Rejection
of the World 590

2. Tensions and Compromises Between Ethics and Politics 593

3, Natural Law and Vocational Ethics 597

Notes 60 1

*»V. RELIGIOUS ETHICS AND THE WORLD: SEXUALITY AND ART 6o2

i. Orgy versus Chastity 602

2. The Religious Status of Marriage and of Women 604

3. The Tensions between Ethical Religion and Art 607

Notes 610

XV. THE GREAT RELIGIONS AND THE WORLD 6ll

i. Judaism and Capitalism 61 1

2. Jewish Rationalism versus Puritan Asceticism 61 ;

3. The This-Worldliness of Islam and Its Economic Ethics 623

4. The Other-Worldliness of Buddhism and Its Economic Consequences 627

5. Jesus' Indifference Toward the World 630

Notes 634

.'^i*£j&"&ix-v--L.\

*>**t-*i' i- r-^*±

Analytical Contents X V

Chapter VII
THE MARKET: ITS IMPERSONALITY AND ETHIC (Fragment) 63;
Notes 640

VOLUME 2

Chapter V1U
ECONOMY AND LAW (SOCIOLOGY OF LAW) 641

». FIELDS OF SUBSTANTIVE LAW 64 1

i. Public Law and Private Law 641

2. Right-Granting Law and Reglementation 644

3. "Government" and "Administration" 644

4. Criminal Law and Private Law 647

5. Tort and Crime 649

6. Imperium 651

7. Limitation of Power and Separation of Powers 652

8. Substantive Law and Procedure 653

9. The Categories of Legal Thought 654

Notes 658

if. FORMS OF CREATION OV RIGHTS 666

i, Jjjgical Categories of "Legal Propositions" — Liberties and Powers —

Freedom of Contract 666
i. Development of Freedom of Contract — "Status Contracts" and

"Purposive Contracts"— The Historical Origin of the Purposive

CfMitracts 668

3. Institutions Auxiliary to Actionable Contract: Agency; Assignment;
Negotiable Instruments 681

4. Limitationsof Freedomof Contract 683

j. Fxi-msion of the Effect of a Contract Beyond Its Parties—
"Special Law" 694

6. Associational Contracts— Juristic Personality 705

7. Freedom and Coercion 729 ^ t

Notes 732

ill. EMERGENCE AND CRHATION OP LEGAL NORMS 753

i , The Emergence of New Legal Norms— Theories of Customary
Law Insufficient as Explanations 753

XVI ANALYTICAL CONTENTS

%. The Role of Party Practices in the Emergence and Development
of Lega! Norms 754

3. From Irrational Adjudication to the Emergence of Judge-Made Law 758

4. Development of New Law Through Imposition from Above 760
J. Approaches to Legislation 765

6, The Role of the Law Prophets and of the Folk Justice of the
Germanic Assembly 768

7. The Role of Law Specialists 775 , \

Notes 776

IV. THE £.EGAL HONORATIORES AND THE TYPES OF
LEGAL THOUGHT 784

i. Empirical Legal Training: Law as a "Craft" 785

2. Academic Legal Training: Lawas a "Science "—Origins
in Sacred Law 789

3. Legal Honoratiores and the Influence of Roman Law 792

Notes 802

V. FORMAL AND SUBSTANTIVE RATIONALIZATION — THEOCRATIC
AND SECULAR LAW 809

i . The General Conditions of Legal Formalism 809

2. The Substantive Rationalization of Sacred Law 815

3. Indian Law 816

4. Chinese Law 818

5. Islamic Law 818

6. Persian Law 8z2

7. Jewish Law 823

8. Canon Law 8a8

Notes 83 1

VI. IMPERIUM AND PATRIMONIAL ENACTMENT:
THE CODIFICATIONS 839

i. Imperium 839

2. The Driving Forces Behind Codification 848

3. The Reception of Roman Law and the Development of Modern
Legal Logic 852

4. Types of Patrimonial Codification 856

Notes 859

Vit. THE FORMAL QUALITIES OF REVOLUTIONARY LAW-
NATURAL LAW 865

1 . The French Civil Code 865

2. Natural Law as the Normative Standard of Positive Law 866

3. The Origins of Modern Natural Law 868

4. Transformation of Formal into Substantive Natural Law 868

5. Class Relations in Natural Law Ideology 871

6. Practical Significance and Disintegration of Natural Law 873

7. Legal Positivism and the Legal Profession 875

Notes 876 • '

Analytical Contents XVII

Viii. "THE FORMAL QUALITIES OF MODERN LAW 880

i. Particularism in Modem Law 880

2. The Anti-Formalistic Tendencies of Modern Legal Development 881

3. Contemporary Anglo-American Law 889

4. Lay Justice and Corporative Tendencies in the Modern Legal
Profession 892

. Notes 895

Chapter IX
POLITICAL COMMUNITIES *V , 901

1. Nature and "Legitimacy" of Territorial Political Organizations 901

2. Stages in the Formation of Political Association 904

3. Power Prestige and the "Great Powers" 910

4. The Economic Foundations of "Imperialism" 913

5. The Nation 921

6. The Distribution of Power Within the Political
Community: Class, Status, Party 926

a. Economically Determined Power and the Status Order 926
» b. Determination of Class Situation by Market Situation 927

c. Social Action Flowing from Class Interest 928

d. Types of Class Struggle 930

b. Status Honor 932

p. Ethnic Segregation and Caste 933

c Status Privileges 935

h. Economic Conditions and Effects of Status Stratification 936

1. Parties 938

Notes 939

Chapter X
DOMINATION AND LEGITIMACY 94 ,

1. Domination by Economic Power and by Authority 941

2. Direct Democracy and Rule by Notables 948

„ 3- Organizational Structure and the Bases of Legitimate Authority 952

Notes 954

A V I I I ANALYTICAL CONTENTS

Chapter XI

BUREAUCRACY ,

956

i. Characteristics of Modern Bureaucracy 956

2. The Position of the Official Within and Outside of Bureaucracy 958

I. Office Holding As a Vocation 958

II. The Social Position of the Official 959

a. Social Esteem and Status Convention 959

b. Appointment versus Election: Consecjuences for Expertise 960

c. Tenure and the Inverse Relationship Between Judicial
Independence and Social Prestige 962

b. Rank As the Basis of Regular Salary 963
b. Fixed Career Lines and Status Rigidity 963

3. Monetary and Financial Presuppositions of Bureaucracy 963
a. Excursus on Tax-Farming 965

. b. Office Purchase, Prebendal and Feudal Administration 966

c. Excursus on the Superiority of Status Incentives over
Physical Coercion 967

d. Summary 968

4. The Quantitative Development of Administrative Tasks 969
Excursus- oa the Degree of Bureaucratization in

Historical Empire Formations 969

5. Qualitative Changes of Administrative Tasks: The Impact of
Cultural, Economic and Technological Developments 971

6. The Technical Superiority of Bureaucratic Organization over
Administration by Notables 973

a. Excursus on Kadi Justice, Common Law and Roman Law 976

b. Bureaucratic Objectivity, Raison d'Etat and Popular Will 978

7. The Concentration of the Means of Administration 980
a. The Bureaucratization of the Army by the State and by

Private Capitalism 980
B. The Concentration of Resources in Other Spheres, Including
the University 982

8. The Leveling of Social Differences 983

a. Administrative Democratization 983

b. Mass Parties and the Bureaucratic Consequences of
Democratization 984

c. Excursus: Historical Examples of "Passive Democratization" 985

d. Economic and Political Motives Behind "Passive
Democratization" 986

9. The Objective and Subjective Bases of Bureaucratic Perpetuity 987
o. The Indeterminate Economic Consequences of Bureaucratization 989

11. The Power Position of the Bureaucracy 990

a. The Political Irrelevance of Functional Indispensability 991

b. Administrative Secrecv 992

c. The Ruler's Dependence on the Bureaucracy 993

12. Excursus on Collegiate Bodies and Interest Croups 994

13. Bureaucracy and Education 998

a. Educational Specialization, Degree Hunting and Status Seeking 998

Analytical Contents XIX

b. Excursus on the "Cultivated Man" iooi
14. Conclusion 1002

Notes 1 003

Chapter XU
PATRIARCH ALISM AND PATRIMONIALISM 1006

1. The Nature and Origin of Patriarchal Domination 1006
1. Domination by Honoratiores and Pure Patriarchalism 1 009

3. Patrimonial Domination 1010

4. The Patrimonial State 1013

5. Power Resources: Patrimonial and Non-Patrimonial Armies 1015

6. Patrimonial Domination and Traditional Legitimacy 1020

7 Patrimonial Satisfaction of Public Wants. Liturgy and Collective
Responsibility. Compulsory Associations. 1022

8. Patrimonial Offices 1025

9. Patrimonial versus Bureaucratic Officialdom 1028

10. -The Maintenance of Patrimonial Officials. Benefices in Kind and
s in Fees 163 1

1 1 . Decentralized and Typified Administration As a Consequence of
Appropriation and Monopolization 1038

1 2. Defenses of the Patrimonial State Against Disintegration 1 042

13. Ancient Egypt 1044

14. The Chinese Empire 1047

15. Decentralized Patrimonial Domination: Satrapies and Divisional
Principalities io;i

16. Patrimonial Rulers versus Local Lords 1055

17. The English Administration by Notables, the Gentry's Justices
of the Peace, and the Evolution of the "Gentleman" 1059

18. Tsarist Patrimonial ism 1064

19. Patrimonial ism and Status Honor 1068

Notes 1069 .

Chapter XIII
FEUDALISM, STANDESTAAT AND PATRIMONIALISM 1070

1 . The Nature of Fiefs and Types of Feudal Relationships 1070

2. Fiefs and Benefices 1073

3- The Military Origin of Feudalism 1077

4. Feudal Legitimation 1078

5. The Feudal Separation of Powers and Its Typification 1082

6. The Standestaat and the Transition from Feudalism to Bureaucracy 1085

7. Patrimonial Officialdom 1088

8. The indeterminate Economic Preconditions of Patrimonialism
and Feudalism 1090

9. The Impact of Trade on the Development of Patrimonialism 1092
1 o. The Stabilizing Influence of Patrimonialism and Feudalism

Upon the Economy 1094

X X ANALYTICAL CONTENTS

ii. Monopolism and Mercantilism 1097

12. The Formation and Distribution of Wealth under Feudalism 1099

13. Patrimonial Monopoly and Capitalist Privilege J102

1 4. Ethos and Style of Life 1 1 04

Notes 1 1 09

Chapter XIV
CHARISMA AND ITS TRANSFORMATIONS ' mi

'(. THE NATURE AND IMPACT OF CHARISMA I I I I

1 . The Sociological Nature of Charismatic Authority 1 1 1 1 '

2. Foundations and Instability of Charismatic Authority 1 114

3. The Revolutionary Nature of Charisma 1 1 1 5

4. Range of Effectiveness 1117

5. The Social Structure of Charismatic Domination j i 19

6. The Communist Want Satisfaction oF the Charismatic Community 1 1 19

it. THE GENESIS AND TRANSFORMATION OP CHARISMATIC
AUTHORITY I 121

1. The Routinization of Charisma 1121

2. The Selection of Leaders and the Designation of Successors 1 123

3. Charismatic Acclamation 11 25

4. The Transition to Democratic Suffrage 1127

5. The Meaning of Election and Representation 1 ja8

6. Excursus on Party Control by Charismatic Leaders, Notables and"
Bureaucrats 1 130

7. Charisma and the Persistent Forms of Domination 1 1 33

8. The Depersonalization of Charisma r Lineage Charisma, "Clan State"
and Primogeniture 1 135

9. Office Charisma 1 1 39

10. Charismatic Kingship 1141

11. Charismatic Education 1143

12. The Plutocratic Acquisition of Charisma 1 14;

13. The Charismatic Legitimation of the Existing Order 1146

Hi, DISCIPLINE AND CHARISMA II48

i. The Meaning of Discipline 1 148

2. The Origins of Discipline in War 1 1 50

3. The Discipline of Large- Scale Economic Organizations 1 1 55

Notes 1 1 56

Chapter XV
POLITICAL AND HIEROCRAT1C DOMINATION 1158

1. Charismatic Legitimation: Rulers versus Priests 1 1 ;8

2. Hierocracy, Theocracy and Caesaropapism 1 159

3. The Church 1 163

4. f lierocratic Reglementation of Conduct and Opposition to Personal
Charisma 1 164

5. The Hierocratic Ambivalence Toward Asceticism and Monastieism 1 166

Analytical Contents XXI

6. The Religious-Charismatic and the Rational Achievements of
Moftasticism 1168

7. The Uses of Monasticism for Caesaropapism and Hierocracy 1 1 70

8. Compromises Between Political and Hierocratie Power 1 1 73

9. The Social Preconditions of Hierocratie Domination and of Religiosity 1 1 77

10. The Impact of Hierccracy on Economic Development 1181

a. The Accumulation of Church Lands and Secular Opposition 1181

b. Hierocratie and Bourgeois Trading and Craft Interests 1 183

c. Hierocratie and Charismatic Ethics Versus Non- Ethical Capitalism 1185
D. The Ban on Usury, the Just Price, and the Downgrading of

Secular Vocational Ethics 1 1 88
t. Hierocratie Rationalization and the Uniqueness of Occidental
Culture 1 192

1 1. Hierocracy in the Age of Capitalism and of Bourgeois Democracy r 193

12. The Reformation and Its Impact on Economic Life 1 196

a. The Political and Religious Causes of the Religious Split 1 196

b. Lutheranism 1197

C. Ethics and Church in Calvinism 1 198
j 3. Hierocracy and Economic Ethos in Judaism 1 200

a. Excursus on Interpretations of the Judaic Economic Ethos 1 202
v b. Judaism and Capitalism 1203
14. Sect, Church and Democracy 1204

Notts I2IO

Chapter XVI
THE CITY (NON LEGITIMATE DOMINATION') 1212

t. CONCEPTS AM) CATEGORHiS OF THE CITY ]21i

i. The Economic Concept of the City: The Market Settlement 121 2

2. *i hree Types: T he "Consumer City," the "Producer City," the
"Merchant City" 1215

3. Relation of the City to Agriculture 1217

4. The "Urban Economy" as a Stage of Economic Development 1 2 1 8

5. The Politico-Administrative Concept of the City 1 22c

6. Fortress and Garrison 1221

7. The City as a Fusion of Fortress and Market 1 223

8. The "Commune" and the "Burgher ": A Survey 1 226
a. Features of the Occidental Commune i 226

B. Lack of Communal Features in the Orient 1 226
c. Pre-Communal Patrician Cities— Mecca 1231

Notes 1234

H. THE OCCIDENTAL CITY 1236

1. Character of Urban Landownership and Legal Status of Persons 1236

2. The Rise of the City as a Confraternity i 24 1

3. A Prerequisite for Con fraternization : Dissolution of Clan Ties 1 243

4. Extra-Urban Associations in the Ancient and Medieval City 1244

5. The Sworn Confraternization in the Occident: Legal and Political
Consequences 1 248

6. The caniurationes in Italy 1251

XXII ANALYTICAL CONTENTS

7. The confratentitates in the Germanic North 1256

8. The Significance of Urban Military Autonomy in the Occident 1260
Notes 1262

Hi. THE PATRICIAN CITY IN THE MIDDLE ACES
AND IN ANTIQUITY 1266

1. The Nature of Patrician City Rule 1266

2. The Monopolisrically Closed Rule of the Nobili in Venice 1 268

3. Patrician Rule in Other Italian Communes: The Absence of
Monopolist Closure, and the Institution of the Podesta 1 273

4. English City Oligarchies and Their Constraint by the Royal
Administration 1276

5. Rule of the Council-Patriciate and of the Crafts in Northern Europe 1 28 1

6. Family- Charisma tic Kingdoms in Antiquity 1282

7- The Ancient Patrician City as a Coastal Setdement of Warriors 1 285

8. Ancient ancLMedieval Patrician Cities: Contrasts and Similarities 1 290

9. Economic Character of the Ancient and Medieval Patriciate 1 292
Notes 1 296

IV. THE PLEBEIAN CITY I 30 1

1. The Destruction of Patrician Rule Through the Sworn Confraternity 1301

2. The Revolutionary Character of the Popolo as a Non -Legitimate
Political Association 1 302

3. The Distribution of Power Among the Status Groups of the Medieval
Italian City 1 304

4. Ancient Parallels: Plebs and Tribune in Rome 1 308

5. Ancient Parallels: Demos and Ephors in Sparta 1 309

6. Stages and Consequences of Democratization in Greece 1 3 1 1

a. Differential Voting Rights 131 1

b. The Rise of the Compulsory Territorial Organization and of
Territorial Legislation 1312

c. The Replacement of Notables by Democratic Functionaries 13 14

7. Illegitimate Rulership: The Ancient Tyrannis 1315

8. Illegitimate Rulership: The Medieval Signoria 1317

9. The Pacification of the Burghers and the Legitimation of the Signoria 1 3 1 9
10. Urban Autonomy, Capitalism and Patrimonial Bureaucracy:

A Summary 1322

a. Political Autonomy 1323

b. Autonomous Law Creation 1325

c. Autocephaly 1326

t>. Taxing Autonomy 1327

E. Market Rights and Autonomous Urban Economic Policy 1 328

f. Attitude Toward Non-Citizen Strata 1331

c The City and the Church 1333

Notes 1335

V. ANCIENT AND MEDIEVAL DEMOCRACY 1 339

i. Origin of the Ancient Lower Class: Debtors and Slaves 1340

2. Constituencies of the City: Ancient Territorial Units versus
Medieval Craft Associations 1 343

3. Excursus on Athenian versus Roman Constituencies 1 348

4. Economic Policies and Military Interests 1 349

Analytical Contents XXIII

5. Serfs, Clients and Freedmen: Their Political and Economic Role 1354

6. The Polis as a Warrior Guild versus the Medieval Commercial Inland
City 1359

7. Ancient City States and Impediments to Empire Formation 1363

Notes 1368

Appendices

Append ix 1
TYPES OF SOCIAL ACTION AND GROUPS 1375

Appendix 11

PARLIAMENT AND GOVERNA4ENT IN A RECONSTRUCTED

GERMANY (A Contribution to tfee Political Critique of Officialdom

and Party Politics) 1381

Preface 1381

i. bkjmarck's legacy 1385

:i. BUREAUCRACY AND POLITICAL LEADERSHIP 1393

i. Bureaucracy and Politics 1393

2. The Realities of Party Politics and the Fallacy of the Corporate State 1395

3. Bureaucratization and the Naivete of the Literati 1399

4. The Political Limitations of Bureaucracy 1403

5. The Limited Role of the Monarch [405

6. Weak and Strong Parliaments, Negative and Positive Politics 1 407

7. The Constitutional Weaknesses of the Reichstag and the Problem of
Leadership 1410

Hi. THE RIGHT OF PARLIAMENTARY INQUIRY AND THE
RECRUITMENT OF POLITICAL LEADERS I416

1. Effective Supervision and the Power Basis of Bureaucracy 1417

2. Parliament as a Proving Ground for Political Leaders 1419

3. The Importance of Parliamentary Committees in War and Peace 1420

4. Domestic Crises and the Lack of Parliamentary Leadership 142,4

5. Parliamentary Professionalism and the Vested Interests 1426

XV. BUREAUCRACY AND FOREIGN POLICY I43I

i. The Government's Failure to Curb Harmful Monarchic

Pronouncements 143 1
2. Parliamentary and Legal Safeguards 1438

V- PARLIAMENTARY GOVERNMENT AND DEMOCRATIZATION 1 442

I. Equal Suffrage and Parliamentarism 1442

XXIV ANALYTICAL CONTENTS

2. The Impact of Democratization on Party Organization and
Leadership 1443

3. Democratization and Demagoguery 1449

4. Plebiscitary Leadership and Parliamentary Control 145 1

5. The Outlook for Effective Leadership in Postwar Germany 1459

Notes 1462

INDEX

SchoJars Hi
Historical Names v
Subjects xi

List of Abbreviations

Some of the extant translations were extensively annotated by the
original translators. This annotation was to the largest part retained,
and in some cases complemented by the editors; we also used some of
the annotation provided for the 4th German edition of Wirtsckaft nnd
Gesellschaft by Johannes Winckelmann. The unsigned notes in Part
'One, chs. I — III are by Talcott Parsons, in Part Two, chs. VII-VIII by
Max Rheinstein, and elsewhere by one of the editors as identified at the
head of each section of notes. The following abbreviations were used to
identify the authors of other notes :

(GM)
00

(RIO
CW)
(WO

Hans Gerth and C.'Wright Mills
Guenther Roth
Max Rheinstein
Johannes Winckelmann
Claus Wittich

In the editorial notes, a number of abbreviations were used for works
(or translations of works) by Max Weber; these are listed below. A
group of further bibliographical abbreviations used only in Max Rhein-
stein's annotation to the "Sociology of Law" is given in Part Two, ch. J
VIII:*, n. 1 (pp. 658-661 below).
AfS or Archiv
Archiv fiir Sozialwissenschaft und SozialpoliHk. Tubingen: J. C. B.
Mohr (Paul Siebeck). (A scholarly periodical edited by Max Weber,
Edgar Jaffe and Werner Sombart from 1904 on.)
Agrargeschichte
Die romische Agrargeschichte in ikrer BedeuPung fur das Stoats- und
Privatrecht. Stuttgart: Ferdinand Enke, 1891. (Weber's second dis-
sertation.)

"Agrarverhaltnisse"
-"Agrarverhalrnisse im Altertum," in Handworterhuch der Staats-

[xxv]

X X V I LIST OF ABBREVIATIONS

wissenschaften, 3rd ed., I (1909), 52-188. Reprinted in GAzSW,
1-288. (Page references are to^this reprint.)

Ancient Judaism or AJ
Ancient Judaism. Translated and edited by Hans H. Gerth and Don
Martindale. Glencoe, 111.: The Free Press, 1952. (A translation of
"Das antike Judentum," Part III of "Die Wirtschaftsethik der Welt-
religionen," first published in AfS, 1917-19, and of a posthumously
published study, "Die Pharisaer," both in GAzRS, III.)

Economic History

General Economic History. Translated by Frank H. Knight. London
and New York: Allen & Unwin, 1927; paperback re-issue, New
York: Collier Books, 1961. (A translation of Wirtsckaftzgeschichte.
Page references in ch. VIII are to the 1927 edition, elsewhere to the
1961 paperback.)

Fischofl.

The Sociology of Religion. Translated by Ephraim Fischoff, with an
introduction by Takott Parsons. Boston: Beacon Press, 1963.

GAzRS

Gesammelte Aufsatze zur Religionssoziologie. 3 vols. Tubingen: J. C.
B. Mohr (Paul Siebeck), 1920-21; unchanged re-issue 1922-23.

GAzSS

Gesammelte Aufsatze zur Soziologie und Sozialpolitik. Tubingen:
J.'C B. Mohr (Paul Siebeck), 1924.

GAzSW

Gesammelte Aufsatze zur Sozial- und Wirtschaftsgeschichte. Tubin-
gen: J.C. B. Mohr (Paul Siebeck), 1924.

GAzW

Gesammelte Aufsatze zur Wissenschaftslekre. 2nd ed. revised and ex-
panded by Johannes Winckelmann. Tubingen: J. C. B. Mohr (Paul
Siebeck), 1951.(15! ed. 1922.)

Gerth and Mills
From Max Weber: Essays in Sociology. Translated and edited by

" Hans H. Gerth and C. Wright Mills. New York: Oxford University
Press, 1946.

GPS

Gesammelte Polttische Schriften. 2nd ed. revised and expanded by

Johannes Winckelmann, with an introduction by Theodor Heuss.

Tubingen: J. C. B. Mohr (Paul Siebeck), 1958. (1st ed. Miinchen:

Drei Masken Verlag, 1921.)
Hande Isgese llschaften

Zur Geschichte der Handelsgesellschaften in Mittehdter. (Nacfe

List of Abbreviation.-, XXVII

sudeuropaHschen Quellen). Stuttgart; Ferdinand Enke, 1889. Re-
printed in GAzSW, 312-443. (Page references are to the reprint.
This was Weber's first dissertation.)

Protestant Ethic
The Protestant Ethic and the Sprit of Capitalism. Translated by Tal-

' cott Parsons, with a foreword by R. H. Tawney. New York: Charles
Scribner's Sons, 1958 (first publ. London, 1930). (A translation of
"Die protestantische Ethik und der Geist d*s Kapitalismus," GAzRS,
I, 1-206; first published in AfS, 1904-05.)

R ech tssoziologie
Rechtssoziolcgie. Newly edited from the manuscript with an intro-
duction by Johannes Winckelmann. ("Scziologische Texte," vol. 2.)
Neuwied. Hermann Luchterhand Verlag, i960 (2nd rev. ed. 1967).
(This is the German edition of the "Sociology of Law" underlying
the revised translation in Part Two, ch. VIII, below.)

Religion of China
The Religion of China. Confucianism and Taoism. Translated and
edited by Hans H. Gerth. New edition, with an introduction by C. K.
Yang. New York: Macmillan, 1964 (1st ed. Free Press, 1951). (A
translation of "Konfuzianismus und Taoismus," Part I of "Die Wirt-
schaftsethik der Weltreligionen," first published in AfS, 1916, re-
printed in GAzRS, I, 276-536.)

Religion of India
The Religion of India. The Sociology of Hinduism and Buddhism.
Translated and edited by Hans H. Gerth and Don Martindale.
Glencoe, 111.: The Free Press, 1958., (A translation of "Hinduismus
und Buddhismus," Part II of "Die VVirtschaftsethik der Weltre-
ligionen," first published in AfS, 1916-17, reprinted in GAzRS, II.)

Rheinstein and Shils

Max Weber on Law in Economy and Society. Translated by Edward
, Shils and Max Rheinstein, edited and annotated by Rheinstein. Cam-
bridge, Mass.: Harvard University Press, 1954.

Shils and Finch
The Methodology of the Social Sciences. Translated and edited by
Edward A. Shils and Henry A. Finch. Glencoe, 111.: The Free Press,
1949. (A translation of three methodological essays, "Die 'Objektivitat'
sozialwissenschaftlicher und sozialpolitischer Erkenntnis," AfS, 1904;
"Kritische Studien auf dem Gebiet kulturwissenschafdicher Logik,"
AfS, 1906; "Der Sinn der 'Wertfreiheit' der soziologischen und
okonomischen Wissenschaften," Logos, 1 917/18; reprinted in GAzW,
146-214, 21 5-290, 475-526.)

XXVIII LIST OF ABBREVIATIONS

Theory
The. Theory of Social and Economic Organization. Translated by
A. M.. Henderson and Takctt Parsons, edited with an introduction
by Parsons. New York: The Free Press, 1964 (first publ. New York:
Oxford University Press, 1947).

Wirtschaftsgeschichte or Universalgeschichte

Wirtschaftsgeschichte. Abriss der universalen Sozial- und Wirtschafts-
geschichte. Edited from lecture scripts by Siegmund Hellmann and
Melchior Palyi. Mtinchen: Duncker & Humblot, 1923. (2nd ed. 1924;
3rd rev. ed. by Johannes Winckelmann, 1958.)

WuG and WwG-Studienausgabe
Wirtsckaft und Gesellschaft. Grundriss der verstehenden Soziohgie,
4th edition, revised and arranged by Johannes Winckelmann, 2 vols.
Tubingen: J. C. B. Mohr (Paul Siebeck), 195& WwG-Studien-
ausgabe refers to the licensed paperback edition (2 vols.; Koln-Berlin:
Kiepenheuer & Witsch, 1964) which already incorporates some of
Winckelmann's further revisions for the forthcoming definitive 5th
German edition.

Preface to the 1978 Re-issue

After seven] years of being oi^t of print, during which rime it rapidly
attained the status of a bibliopnilic rarity, Economy and Society is now for
the first time available in this country and abroad as a hardcover and a paper-
back, thanks to the cooperation of the American publishers who have sepa-
rately published segments of the work in older versions.

The present re-issue is identical with our 1968 edition, although some
errata are eliminated. In the meantime, Professor Johannes Winckelmann,
on whose fourth German edition of 1956 and 1964 our own edition is based,
has completed his fifth and final edition with three hundred pages <f an-
notations — a feat that only a member of his scholarly generation could have
accomplished (Tubingen: Mohr-Siebeck, 1976). When the English editors
prepared their own edition, they cooperated closely with Winckelmann in
clarifying many dubious passages in the posthumously published work and
in identifying literary and historical references, but unfortunately, the new
annotations of the fifth edition could not be included in. the present English
re-issue.

Several important Weber translations have appeared since 1968. Edith E
Graber translated Weber's essay "On Some Categories of Interpretive Soci-
ology'' (M.A. thesis, Department of Sociology, University of Oklahoma,
1970). This essay, the most important definitions of which appear here in
Appendix I, was a fragmentary first draft of die general conceptual under-
pinnings for the work, but Weber decided to publish it separately in 1913.
Just before conceiving the idea of Economy and Society Weber finished his
great encyclopedic essay on the economic and political history of antiquity,
which Alfred Heuss, one of the most respected German classicists, has called
"the most original and illuminating study yet made of the economic and
social development of antiquity." This work, discussed here in relation to
Economy and Society in the introduction (xlii-lvii), has now been trans-
lated by R. I. Frank under the title The Agrarian Sociology of Ancient Civili-
zations (London; New Left Books, 1976).

Most of Weber's methodological critiques, which prepared the way f_or
the positive formulation of his sociology in Economy and Society, have now

[xxix]

XXX Preface to the 1978 Re-issue

been translated. Guy Oakes translated and edited Roscher and Knies: The
Logical Problems of Historical' Economics (New York: The Free Press,
1976) and Critique of Stammler (New York: The Free Press, 1977). An
excursus on the Stammler critique is found in Economy and Society, pp.
325-32 below. Oakes has also translated and edited Georg Simmel's The
Problems of the Philosophy of History (New York: The Free Press, 1977),
to which Weber refers in his prefatory note to ch. I, p. 3 below. Louis
Schneider translated "Marginal Utility Theory and the So-Called Funda-
mental Law of Psychophysics," Social Science Quarterly, 56:1, 1975, 21-36.
This leaves untranslated only Weber's demolition of the "energeticist"
theories of culture of the famed chemist and natural philosopher Wilhelm
Ostwald, and some scattered but important methodological observations in
his substantive writings.

The 1968 introduction by Roth was intended in part as a supplement to
Keinhard Bendix's Max Weber: An Intellect-ual Portrait (to6o), which for
the first time presented comprehensively the substance of Weber's compara-
tive sociology of politics, law and religion as it is found in Economy and
Society and the Collected Essays in the Sociology of Religion (containing
the studies of the Protestant ethic and sects in relation to the spirit of capi-
talism and in contrast to the religious and social order of China, India and
Ancient Judaism). This well-known study too was re-issued in 1978 by the
University of California Press with a new introduction by Roth, which
covers the Weber literature accumulated since i960. One further yield from
Bendix's and Roth's concern with Weber was a joint volume. Scholarship and
Partisanship, also published by the University of California Press in 1971.
Moreover, Roth has continued his methodological exploration of Economy
and Society in three other essays, "Socio-Historical Model and Developmental
Theory," American Sociological Review, 40:2, April 75, 148-57; "History
and Sociology" British Journal of Sociology, 27:3, Sept. 76, 306-18; and
"Religion and Revolutionary Beliefs," Social Forces, 55:2, Dec. 76, 257-72.

An up-to-date bibliography of the almost limidess secondary literature is
Constans Seyfarth and Gert Schmidt, eds., Max Weber Bibliographic: Eiwe
Dokamentation der SekundarUteratur (Stuttgart: Enke, 1977), 208 pp. For
the latest bibliography of Weber's own writings, see Dirk Kasler, "Max-
Weber-Bibh'ographie," Kolner Zeitschrift fur Soziologie, 27:4, 1975, 703-30.

For the present re-issue the editors are greatly indebted to the unflagging
interest and efforts of Mr. Grant Barnes of the University of California Press
and to the support of Mr. Georg Siebeck, of the firm of Mohr-Siebeck in
Tubingen, the German publisher of Weber's works.

Finally, we dedicate with sorrow this edition to the memory of Carolyn
Cain Roth (1934-1975), who for several years lived with the burden of our
intense labors, showing great forebearance and retaining the salutary dis-
tance of an artistic vision, which should always balance the sober concerns
of scholarship.

BAINBBIDGE ISLAND, WASHINGTON GuentheT Roth

Scarsdale, New York Clous Wittich

February 1977

Prefc

ace

This is the first complete English edition of Economy and Society.
All hitherto unavailable chapters and sections have been translated and
the annotation has been considerably expanded. The Appendix contains
a brief terminological supplement and one of Weber's major political
essays. All previously translated parts used here have been thoroughly
revised and many passages have been rewritten. The original translators
of these chapters are absolved from all responsibility for the present ver-
sion of their work. We would like to thank Ephraim Fischoff for going
over our revision of his translation of the "Sociology of Religion" (Part
Two, ch. VI) and for making further suggestions and offering other
help. However, he too should not be held responsible for the final
version.

A number of extant translations were completely replaced: in Part
One, ch. IV, "Status Groups and Classes"; in Part Two, ch. Ill : 3, "The
Regulation of Sexual Relations in the Household," ch. IV: 3, "The
Oikos," ch, XIV;i-M, "Charisma and Its Transformations," and ch. XVI,
"The City." This last book-length chapter was newly translated by
Wittich; all other new translations were first done by Roth. Our strategy
of translation is explained in the Introduction.

The following earlier translations of sections of Wirtschaft und
Gesellschaft have been used and revised with the permission of the
publishers, which is gratefully acknowledged.

Ephraim Fischoff, trans., The Sociology of Religion (Boston; Beacon

Press, 1963), pp. 1-274; now Par* Two, ch. VI;
Hans Gerth and C. Wright Mills, trans, and eds., From Max Weber:

Essays in Sociology (New York: Oxford University Press, 1946), pp.

159-244, 253-262; now Part Two, chs. IX:3~6, XI, and XIV ;m;
Ferdinand Kolegar, trans., "The Household Community" and "Ethnic

[xxxi]

X X X 1 1 PREFACE

Groups/' in Talcott Parsons et al., eds., Theories of Society (New
York; The Free Press of Glencoe, 1961), vol. I, pp. 296-298, 302-
309; now Part Two, ch. Ill: i , ch. IV: 2, and ch. V:2;

Talcott Parsons, ed. (A. M. Henderson and T, Parsons, trans.), The
Theory of Social and Economic Organization (New York: The Free
Press of Glencoe, 1964; originally published by Oxford University
Press, 1947), pp. 87-423; now Part One, chs. I — III;

Max Rheinstein, ed. (Edward Shils and Max Rheinstein, trans.), Max
Weber on Law in Economy and Society (Cambridge, Mass. : Harvard
University Press, 1954), pp. 1 1-348; now Part Two, ch. I, chs. VII-
VIII,ch.IX:i-2,andch.X.

Without the dedication and hard labor of the previous translators
the present edition might never have been undertaken. Hans Gerth, who
spent a singular amount of time on the translation of Weber's works, de-
serves special recognition. The broadest contribution to the reception of
Weber's thought has clearly been made by Talcott Parsons' translations
and writings.

Our special gratitude goes to Prof. Johannes Winckelmann, the
German editor of Weber's works and head of the Max Weber Institute
at the University of Munich, who gave us access to his text revisions for
the forthcoming 5th edition of Wirtschaft und Gesellschaft and always
freely shared his thoughts on textual and other problems.

Finally, we want to thank Hans L. Zetterberg, who combines
scholarship and entrepreneurship; he held out the challenge, patiently
waited for the manuscript, and then saw it through to its publication.
We are also grateful to Mr. Robert Palmer for preparing the index and
to Mr. Sidney Solomon of the Free Press for supervising the technical
preparation of the work and for designing the volumes.

Berlin and new york Guenther Roth

March 1968 Claus Wittich

INTRODUCTION

by Guenther Roth

We know of no scientifically ascertainable ideals. To be sure, that makes
out efforts more arduous than those of the past, since we are expected to
create our ideals from vnthin our breast in the very age of subjectivist
culture; but we must not and cannot promise a fool's paradise and an
easy road to it, neither in thought nor in action. It is the stigma of our
human dignity that the peace of our souls cannot be as great as the peace
of one who dreams of such a paradise.

Weber in 1909

1. A Claim

This work is the sum of Max Weber's scholarly vision of society. It
has become a constitutive part of the sociological imagination as it is
understood today. &xmomy and Society was the first strictly empirical
comparison of social structure and normative order in world-historical
depth. In this manner it transcended the plenitude of "systems" that
remained speculative eve<? as they claimed to establish a science of
society.

Decades have passed since the manuscript was begun and left un-
finished, yet few works in the realm of social science have aged so little,
Its impact has been considerable over the years, although in a frag-
mented and erratic fashion as the various parts became available only
piecemeal to the English reader or remained altogether put of reach.
Weber's ideas on social action and sociological typology, oW|&strumentaI
and substantive rationality, on formal and material justice,' & bureauc-
racy and charisma, on religious beliefs and economic conduct, have been
gradually assimilated by social scientists—by way of accurate reception,
imaginative adaptation and, not too infrequendy, inventive misinterpreta-
tion,.

The renaissance of comparative study in the nineteen-sixties has
restored some of the original intellectual setting of Economy and Society.

[xxXiii]

XXXIV INTRODUCTION

This has given a new pertinency to the work and is one reason for the
complete English edition; another is the hoped-for correction of the un-
even influence exerted by the isolated parts. Now the work has a fair
chance to be understood as a whole, and its readers have a better oppor-
tunity to comprehend it — this will be a test for both.

Economy and Society is Weber's only major didactic treatise. It was
meant to be merely an introduction, but in its own way it is the most
demanding "text" yet written by a sociologist. f Fhe precision of its defini-
tions, the complexity of its typologies and the wealth of its historical
content make the work, as it were, a continuous challenge at several
levels of comprehension: for the advanced undergraduate who gropes
for his sense of society, for the graduate student who must develop his
own analytical skills, and for the scholar who must match wits with
Weber.

Economy and Society is part of the body of knowledge on which
Weber drew in his unwitting testament, his speeches on "Science as a
Vocation" and "Politics as a Vocation," which he delivered shortly after
the end of the first World War before a small number of politically
bewildered students. By now thousands of students have read these two
rhetorical masterpieces with their poignant synopsis of his philosophical
and political outlook as well as of his scholarly animus. Yet the very
compactness of the two speeches impedes easy comprehension. Economy
and Society elaborates much that is barely visible in them. However, it
-minimizes the propagation of Weber's own philosophical and political
views, since it wants to establish a common ground for empirical investi-
gation on which men of different persuasions can stand; in contrast to
some of the methodological polemics, Economy and Society is meant to
set a positive example. Yet there is more to it than is readily apparent.
The work contains a theory of the possibilities and limitations of political
democracy in an industrialized and" bureaucratized society, a theory that
Weber considered not only empirically valid but politically realistic as
against a host of political isms: romanticist nationalism, agrarianism,
corporate statism, syndicalism, anarchism, and the Marxism of the time.
Hence, there is in the work an irreducible element of what Weber con-
sidered political common sense, but this does not vitiate the relative
value-neutrality of the conceptual structure. Moreover, the work is full
of irony, sarcasm and the love of paradox; a dead-pan expression may
imply a swipe at the Kaiser, status-conscious professors or pretentious
litterateurs. 1 And finally, with all its seemingly static typologies, the

i . Ironic formulations and wordplays are hard to render in translation, and
it would have been seif -defeating pedantry to explain more than a fraction in the

editorial rtores.

i] A Claim XXXV {

work is a sociologist's world history, his way of reconstructing the paths
of major civilizations.

2. Sociological Theory, Comparative Study and Historical

Explanation

Economy and Society builds a sociological scaffolding for raising
some of the big questions about the origins and the possible directions
of the modern world. Weber set out to find more specific and empirically
tenable answers to those questions than had been given previously. He
belonged to the small number of concerned men who shared neither the '
wide-spread belief in Progress, which was about to be shattered by the
first World War, nor the new philosophical irrationalism, which bad
begun to appeal to many younger men.

Weber's image of "economy and society" is so widely shared today
among research-oriented students of society that in its most general
formulation it no longer appears exceptional, unless we remember that
it drew the lines against Social Darwinism, Marxism and other isms of
the time. Weber rejected the prevalent evolutionary and mono-causal
theories, whether idealist or materialist, mechanistic or organicist; he
fought both the reductionism of social scientists and the surface approach
of historians, both the persistent search for hidden "deeper" causes and
the ingrained aversion against historically transcendent concepts. He took
it for granted that the economic structure of a group was one of its major
if variable determinants and that society was an arena for group con-
flicts. He did not believe, however, in the laws of class struggle, jungle
or race; rather, he saw men struggle most of the time under created
laws and within established organizations. Given the incomplete recep-
tion of his work, the roles he attributed to force and legitimacy have
been overemphasized in isolation. Economy and Society clearly states
that men act as they do because of belief in authority, enforcement by
■staffs, a calculus of self-interest, and a good dose of habit. However,
Weber was not much interested in master-key statements on the nature
of Society and was set against the "need for world-formulae" CWeh-
formelbedurfnis'). Unlike Engels, he saw no grounds for assuming an'
"ultimately determining element in history." Economy and Society
demonstrates the rather concrete level on which he wanted to approach
sociological theory and historical generalization.

After 1903 Weber clarified his methodological position toward the
cultural and social sciences in half a dozen essays." But in Economy and

2. Cf. 1. Roscher und Knies und die logischen Problems der historischen
Nationalokonomie (1903/6), 145 pp.; 2. Die "Gfejefe#viMt" sozialwissenschaft-

XXXVI INTRODUCTION

Society he focussed on those concepts and typologies that would direcdy
, aid the researcher. He developed his sociological theory — his Kategprien-
lehre, as he sometimes called it — as an open-ended, yet logically con-
sistent formulation of fundamental aspects of social action, on the one
hand, and of historical types of concerted acdon ("general ideal types")
on the other. The construction of such trans-epochal and trans-cultural
types as, for example, enterprise and oikos or bureaucracy and hieroc-
racy, makes sociological theory historically comparative. In this way
sociological theory provides uV researcher with the dimensional concepts
and empirical types that are prerequisites for the kind of comparative
mental experiment and imaginative extrapolation without which causal
explanation is impossible in history.

Weber's sociological theory, then, grew out of wide-ranging historical
research and was meant to he applied again to history, past and in the
making. In addition to theory in this genetically historical sense, he em-
ployed substantive theories of differing degrees of historical specificity:

i. Theories explaining a relatively homogeneous historical configura-
tion ("individual ideal type"), such as the spirit of capitalism;

2. Theories about relatively heterogeneous, but historically inter-
related configurations, such as the "economic theory of the ancient states
of the Mediterranean";

3. Theories ("rules of experience") that amount to a summary of
a number of historical constellations, without being testable propositions
in the strict sense: for example, the observation that foreign conquerors '
and native priests have formed alliances, or that reform-minded monks
and secular rulers have at times cooperated in spite of their ineradicable '
antagonism. The occurrence of, the former kind of collaboration, as in
ancient Judaism, or its failure hvcome about in Hellas, due to the batde
at Marathon," may have far-reacnuig historical consequences — one rea-
son for the scholar's interest in such historical "summaries."

licher und sozialpoMscher Erkenntnis\Ci904), 68 pp.; 3. Kritische Studien avf
dem> % &fbiet der kutlurvrissenschafilichen Logik O90;), 75 PP-; 4- Stammlen*
"O\0ptndung" der materialktixhen Geschichtsauftassung (1907), 68 pp., with
t pOrthumously published postscript (zo pp.); J. Die GrenznutzUhre und das
"ptychophysische Grundgesetz" (1908), 15 pp.; 6. "Energetische" KuUvrtheorien
(1909), 16 pp.; 7. Ober den Sinn der "Wertfreikeit" der soziologischen und
okonomischen Wissenxhaften (1917/18), prepared as a memorandum tor a
meeting of the Verein fur Sozialpolitik in 191 3. All are reprinted in GAzW (for
this and other abbreviations used for Weber's works, see the list following this
Introduction). For English . versions of essays 1, 3, and 7, see Max Weber, The
Methodology of the Social Sciences (Edward A. Shils and Henry A. Finch, trans,
and eds.; Glencoe, 111.: The Free Press, 1949).

3. On the battle of Marathon and the category of objective possibility, cf.
Weber in Shils and Finch (edsO, Methodology .... 174.

Comparative Sociological Study

XXXVII

Of course, the explanation of any specific historical event also re-
mains "theoretical" in that it subsumes many discrete actions and is
merely plausible, because unverifiable in the manner of the experimental
sciences. Weber was acutely aware of this difficulty, which was exacer-
bated by the scarcity and unreliability of the sources in most areas of his
investigations, ancient and modern.

Sociologists live, and suffer, from their dual task: to develop gen-
eralizations and to explain particular cases. This is the raison d'Stre of
sociology as well as its inherent tension. It would be incompatible with
the spirit of Weber's approach to value the transhistorical ("functional-
ist") generalizations of any formal sociological theory more highly than
the competent analysis of a major historical phenomenon with the help
of a fitting typology. The sociology of Economy and Society is "Clio's
handmaiden"; the purpose of comparative study is the explanation of a
given historical problem. Analogies and parallels, which at the time
tended, to be used for evolutionary and morphological constructions and
spurious causal interpretations, had for Weber merely instrumental
, purpose:

Whoever does not see the exclusive task of "history" in making itself
superfluous through the demonstration that "everything has happened
before" and that all, or almost all, differences are matters of degree — an
obvious truth — will put the stress on the changes (Verschiebungen) that
emerge in spite of all parallels, and will use the similarities only to
establish the distinctiveness (Eigenart) vis-a-vis each other of the two
orbits [i.e., the ancient and the medieval]. ... A genuinely critical
comparison of the developmental stages of the ancient polis and the
medieval city . . . would be rewarding and fruitful — but only if such a
comparison does not chase after "analogies" and "parallels" in the
manner of the presendy fashionable general schemes of development; in
other words, it should be concerned with the distinctiveness of each
of the two developments that were finally so different, and the purpose
of the comparison must be the causal explanation of the difference. It
remains true, of course, that this causal explanation requires as an
indispensable preparation the isolation (that means, abstraction) of the
individual components of the course of events, and for each component
the orientation toward rules of experience and the formulation of clear
concepts without which causal attribution is nowhere possible. This
should be taken into account especially in the economic field in which
inadequate conceptual precision can produce the most distorted evalu-
ations. 4

Weber had in mind men like Wilhelm Roscher, Ranke's pupil, for
whom

17.)

4. "Agrtrverhalmisse im Altertum," in GAzSW, 257, 288. (C£. below, n.

XXXVIII INTRODUCTION

peoples are "generic biological entities" — as Hintze put it quite ade-
quately. Roscher has explicitly stated that for science the development
of peoples is in principle always the same, and in spite of appearances to
the contrary, in truth nothing new happens under the sun, but always
the old with "random" and hence scientifically irrelevant admixtures.
This obviously is a specifically "scientific" (naturwissenschaftliehe^
perspective. 5

Weber's comparative approach was directed against theories of his-
torical sameness as well as theories of universal stages. He opposed in
particular the interpretation of Antiquity, including ancient capitalism,
as a "modern" phenomenon; this interpretation was advanced by "re-
alistic" historians reacting against the humanist tradition with its
idealization of classic Greece and Rome. Weber equally rejected the
contemporary stage theories of rural and urban economic development.
He, too, believed in a "general cultural development," but he focussed
on the dynamics of specific historical phenomena, their development as
well as their decline. For this purpose he employed several comparative
devices (which will be illustrated below, p. xliii): (a) the identification
of similarities as a first step in causal explanation; (b) the negative com-
parison; (c) the illustrative analogy; (d) the metaphorical analogy.

The ideal type too has a comparative purpose. It was Weber's solu-
tion to the old issue of conceptual realism versus nominalism, but in the
context of the time it was his primary answer to the scientific notion of
law and to the evolutionary stage theories. Weber wrote much more on
the logical status of the ideal type than on his comparative strategy. This
imbalance is reflected in the literature; a great deal has been written
about the ideal type, but very litde that is pertinent to the art of com-
parative study. As historical "summaries" of varying degrees of specificity,
ideal types are compared with slices of historical reality." For the re-
searcher the issue is not whether the ideal type is less "real" than other
historical concepts; rather, his task consists in choosing the level of con-
ceptual specificity appropriate for the problem at hand. Weber's ideal
types, as the reader can himself see, involve a theory about the dynamics
and alternative courses of the phenomena involved. They are not meant

5. "Roscher und Knies . . . ," in GAzW, 13.

6. "All expositions for example of the 'essence' of Christianity are ideal types
enjoying only a necessarily very relative and problematic validity when they are
intended ... as the historical portrayal of facts. On the other hand, such presenta-
tions are of great value for research and of high systematic value for expository
purposes when they are used as conceptual instruments for comparison and the
measurement of reality. They are indispensable for this purpose." Weber in Shils
and Finch (eds.), Methodology . . . , 97.

Comparative Sociological Study

XXXIX

to fit an evolutionary scheme, but they do have a developmental dimen-
sion. A

Ideal types are constructed with the help of historical rules of ex-
perience, which are used as heuristic propositions. For example, Weber's
theory of monarchy includes the observation that monarchs throughout
the ages, from ancient Mesopotamia up to Imperial Germany, have been
welfare-minded because they needed the support of the lower strata
against the higher; however, these higher strata, nobility ^,id priesthood,
usually remain important to the maintenance of monarchic power and
legitimacy. Hence, the stability of monarchy rests in part on the ruler's
ability to balance the two groups. It is from such observations, which
permit the necessary specification, that the ideal type of patrimonialism
(Part Two, ch. XII below) emerges.

Weber's comparative strategy was directed toward establishing, with
the aid of his typologies, (O the differences between modern and older
conditions, and (2) the causes of the differences. This involved the
exploration of secular phenomena that had "dropped out" of history (for
example, ancient capitalism) hut that were culturally important in them-
selves or useful for identifying modernity; it also involved the search
for the "causal chains" of history.

In the absence of a reductionist one-factor scheme and of historical
"one-way streets," the relationship of economy, society and polity be-
came for Weber a multi-faceted set of problems encompassing the inter-
play of organization and technique of production, social stratification,
civil and military administration, and religious and secular ideology.
Apart from the issue of the uniqueness of Western civilization, this per-
spective too led Weber to a comparative interest in the workings of
civilizations.

Such a comprehensive program of research required broad knowledge
and expertise in several fields. The historical content of Economy and
Society rests on a large body of scholarly literature, but also on Weber's
previous research. In drawing on historical sources and secondary liter-
ature, Weber had an advantage over those historians whose training had
been mainly philosophical and philological, partly because he was a
trained jurist and economist, partly because he had developed a sociologi-
cal framework within which he could address precise questions to the
secondary literature.

An adequate understanding of Economy and Society should en-
compass Weber's previous research and writings and perceive the close
links. Since Weber rendered no systematic account of his strategy
of comparative study or of the intellectual development that led him

X L INTRODUCTION

to the writing of Economy and Sodety t it appears worthwhile to trace
here the methodological and substantive lines of reasoning that con-
verge in the later work; since almost all of the earlier writings are
untranslated, they will be quoted more extensively than would otherwise
be desirable. 1

3. The Legal Forms of Medieval Trading Enterprises

Even for a man of Weber's generation it was rare to gain competence
as historian of both Antiquity and the Middle Ages, and then to com-
bine this with the study of contemporary concerns — industrialization,
bureaucratization, democratization. Weber began his career in legal and
economic history as both a "Romanist" and "Germanist"; he transcended
the ideological antagonism of the two schools that so sharply divided
German jurisprudence in the 19th century. Weber wanted, first of all, a
good grasp of the varieties of legal and economic arrangements; hence
he emulated the tremendous learning of an Otto Gierke, but he was
out of sympathy with the persistent inclination of the Germanisls to
reduce European history to the dichotomy of Romanized authoritarian
organization Qierrschaftsverhand') and Germanic egalitarian association
CGenossenschaf t) .

From the beginning of his academic career Weber addressed himself
to two broad historical questions: The origins and nature of (1) cap-
italism in Antiquity, the Middle Ages and modem rimes, (2) political
domination and social stratification in the three ages. His dissertation of
1889 dealt with legal institutions of medieval capitalism, his Habilitatum t
of 1 89 1 (that is, the second doctorate required for academic teaching)
with the relationship between Roman politics and capitalism.

The dissertation was a "Germanist" study, On the History of ike
Medieval Trading Companies, written under Levin Goldschmidt. 8
Based largely on printed Italian and Spanish sources, it dealt with
various forms of limited and unlimited partnership that emerged with
the revival of maritime and inland trade and urban craft production.

7. In the following, attention will be given particularly to those studies that
were omitted in Reinhard Bendix, Max Weber: An Intellectual Portrait (New
York; Doubleday, 1060), Anchor edition, xxiii; see chs. I and II on Weber's early
activities, his scholarly and political response to the problems of industrialization
in Germany, especially the agrarian issue in Prussia east of the Elbe river (East
Elbia). The present introduction is an effort to supplement Bendix' work and the
introduction by Hans Gerth and C. Wright Mills in From Max Weber: Essays
in Sociology (New York: Oxford University Press, 1946).

8. Zur Geschichte der Handehgesellschaften m MittelalterXNach sudeuro-
p&ischen QuelUn") (Stuttgart: Enke. 1889), reprinted in GAzSW, 312-443.

mtK^mmtmmamZAtiBima.aa*,.

^iU££ili±*Al*-. T.;,.^.^

3 3 __ Leg^/ Forms of Medieval Trading Enterprises XL I

Medieval capitalism required legal institutions for implementing the
sharing of risk and profit and defining the liabilities and responsibilities
of the parties to a joint venture. Weber investigated the differences be-
tween the partnership forms originating from the institutions of overseas
trade in cities like Genoa and Pisa and those that emerged from the
family craft enterprises of inland cities like Florence. The former were
typically ad hoc associations for trading ventures, the latter more com-
monly continuous households, with family and other members, often
surviving several generations. The partnership forms of overseas trade
Ccommenda, societas maris) were only concerned with delimiting re-
sponsibilities and benefits, but the household enterprises long combined
capitalist and communist modes of operation, before internal closure set
in and they disintegrated as units of commercial enterprise.

A few Weberian guidelines can already be perceived in this highly
technical analysis. Economic and legal development are intertwined, yet
"law follows criteria that are, from the economic viewpoint,, frequently
extraneous";" it may regulate economic conditions far removed from its
own dogmatic and social origins — this was a critique of correspondence
theories, especially of the economically determinist variety. The insist-
ence on the importance of the legal order for economic action is also the
starting point of the first chapter of Economy and Society (Ch. I:i of
the older Part Two). Here the consistency of Weber's basic perspectives
over time is indicated. But the strength of the dissertation lay less in
such a general position than in the vivid and detailed treatment and the
ability to argue firmly with the historical opinions of renowned scholars
such as Gierke and Rudolf Sohm. Yet Weber conceded his inability to
arrive at novel overall conclusions. Already in the preparatory stage of
the dissertation he commented in his ironic fashion:

I had to learn Italian and Spanish well enough to work myself
through books and to read hundreds of statutes . . , worst of all, statutes
written in such ancient dreadful dialects that one can only be aston-
ished by the ability of men at the time to understand such jargon. Well,
I' was kept busy, and if not much has come out of it, it is less my fault
than that of the Italian and Spanish magistrates who faded to include
in the statutes the very things I sought. 10

Weber felt that he had not been able to answer a controversial
question of the time: To what extent were the early forms of the capi-
talist partnership and firm shaped by Roman and Germanic legal influ-

9. GAzSW, 322.

10. Max Weber, Jvgendbriefe, ed. Marianne Weber (Tubingen: Mohr,
n.d.), 274.

X L I I INTRODUCTION

ences? Conclusive answers to Gierke and Sohm appeared possible to him
only after further comparative study, including also Germany. As it was,
the dissertation limited itself to the differences among various forms "of
commercial institutions, in order to lay the groundwork for later research.

The dissertation shows that the exposition in Economy and Society
of the open and closed relationships of household, family, kin-group and
enterprise (esp. chs. 11:2, 1II:i, and IV:2 of Part Two) rests on long-
standing knowledge of historical specifics and early familiarity with the
literature. The later treatment of the associations is a mere summary
with a systematic place in a wider context, yet the illustrations, which at
first sight seem to fill the "empty boxes" somewhat arbitrarily, are often -
based on careful consideration in those earlier studies.

Two years after the dissertation Weber completed a "Romanist"
Habilitation on The Roman Agrarian History in Its Bearing on Public
and Private Law, 11 which qualified him to read Roman, Germanic and
commercial law. He became a law professor in Berlin in 1893 and
almost immediately took over for the ailing Goldschmidt.

4. Economic and Political Power in Ancient Germanic

History

Weber wrote his Roman Agrarian History with the encouragement
of August Meitzen, who was then working on tys monumental compara-
tive study, The Settlement and Agrarian^Structure of the Western and
Eastern Germanic Tribes, Celts, Romans, Finns and Slaves (3 vols.,
1895). For his analysis of property forms and social structure Meitzen
ingeniously used the ancient survey maps of the villages. Weber pro-
ceeded from Meitzen's chapter on the Roman land surveys. This under-
taking was far more difficult than the study of the medieval trading
companies; the findings were bound to be much more hypothetical
because of the paucity and ambiguity of the sources. Weber believed he
had shown that Roman agriculture could be analyzed adequately with
concepts derived from other Indo-Germanic agrarian structures. How-
ever, seventeen years later, in his. second major work on Antiquity, he
wrote that he was still defending the work, but that it had indeed been
full of "youthful sins" and particularly mistaken in its attempt "to apply
Meitzen's categories to heterogeneous conditions," 12 Thus, in his early
years Weber too had been influenced by evolutionary analogues, but by

1 1 . Die rotnische Agrargeschichte in ihrer Bedeutiing fur das Staats- und
Privatrecht (Stuttgart: Enke, 1891).

12. Cf. Agrargeschichte, 2, and "Ajjiarverhaltniss'j . . . ," UAzSW, 287.

Economic & Political Power

XLIII

1904, when he intervened in the dispute about ancient Germanic social
structure, 1 * he combatted them energetically. Together with the critique
of his contemporaries' methodology, Weber elaborated his view of the
historic relationship between political and economic power, a view th*dt
became important fur the typology of .domination in Economy and
Society. At issue was the origin of manorial domination (Grundherr-
schafO, for decades the center of scholarly debate. There was a tend-
ency to explain the whole political and economic history of Germany
in terms of the Grundherrschaft and its variants.

The thesis of the predominance of manorial domination as early as
the period of Caesar and Tacitus was upheld by Georg Friedrich Knapp
and his school, especially by Werner Wittich; they rejected the older
view according to which manorial domination resulted from the trans-
formation of the Frankish levy into a cavalry of feudal vassals. As against
the ^thesis of the Knapp school, Meitzen asserted the free status of the
Germanic peasantry of late Antiquity and pointed to the equal parcelling
of land in the communes. Meitzen did leave an opening to his adver-
saries by acknowledging the nomadic way of life of Germanic tribes in
Caesar's time, but he interpreted the transition from nomadic stock-
breeding to husbandry as an emancipation of "labor from property," a
phrase reminiscent of Karl Rodbertus' views. For Meitzen the Germanic
settlement was the creation of the drive for economic independence
inherent in the equalitarian spirit of the people. Knapp's school, how-
ever, insisted that the free Germanic man of Caesar's day had been a
catde-owner who despised agriculture and those who tilled the soil. The
origin of Grundherrschaft was seen then to lie in the rule of cattle-
owners over peasants. Wittich, for one, buttressed his view with Richard
Hildebrand's scheme of cultural and legal development. "This theory,"
Weber commented, "is one of the attempt:, recendy so numerous, to
comprehend cultural development in the manner of biological processes
as a lawful sequence of universal stages." 11 Hence the assertion of a
universal nomadic stage, at least in the Occident. The theory worked
with analogies from the contemporary nomadic life of Bedouins and

13. "Der Streit urn den Charakter der altgermanischen Sozialverfassung in
der deutschen Literatur des letzten Jahrzehnts," in GAzSW, 508-556; first pub-
lished in JakrhUcher fiir Nattonalokonomie und Statistik, 3d series, vol. 28
(1904).

14. GAzSW, 513, Cf. Richard Hildebrand, Recht und Sitte auf den primj-
tiveren wirtschaftlichen K-ulturstufen (Jena: Fischer, 1896); for Hildebrand's
counterattack, which rejects Weber's interpretation of Germanic agriculture in
Caesar's time, see the second edition of 1907, pp. ssf., 64-f.; see also Werner
Wittich's review essay on Hildebrand, "Die wirtschaftliche Kultur der Deutschen
zur Zeit Caesar's," Historische Zeitschrift, vol. 79, 1897, 45-67-

X L I V INTRODUCTION

Kirghiz, applying them to elucidate Germanic prehistory. If these no-
mads scorned agricultural labor, by inference the Germanic nomads must
have done likewise. Weber objected :

This procedure of a scholar whom I too hold in high esteem is a
good example of the manner in which the concept of "cultural stages"
should not be applied scientifically. Concepts such as "nomadic," "semi-
nomadic," etc., are indispensable for descriptive purposes. For research,
the continuous comparison of the developmental stages of peoples and
the search for analogies are a heuristic means well suited, if cautiously
used, to explain the causes of distinctiveness of each individual develop
ment. But it is a serious misunderstanding of the rationale of cultural
history to consider the construction of stages as more than such a
heuristic means, and the subsumption of historical events under such
abstractions as the purpose of scholarly work — as Hildebrand does — ;
it is a violation of proper methodology to view a "cultural stage" as
anything but a concept, to treat it as an entity in the manner of bio-
logical organisms, or an Hegelian "idea," from which the individual
components "emanate," and hence to use the "stage" for arriving at
conclusions by analogy: If the historic phenomenon y usually follows
x, or if both tend to be co-existent, y 1 must follow x tr or be co-existent,
since x and x 2 are conceptual components of "analogous" stages of
culture.

The mental construct of a cultural stage merely means, analyti-
cally speaking, that the individual phenomena of which it is composed
are "adequate" to one another, that they have — as we could say — a
certain measure of inner "affinity," but not that they are related in any
determinate way CGesetzmassigkeit). ...

The belief in a universal "stage" of nomadic existence, through
which all tribes passed and from which the settlement developed, can
no longer be retained in view of our knowledge of the development of
Asiatic peoples and after Hahn's investigations [Die Haustiere, 1896].
At any rate, the knowledge of a by no means primitive form of agri-
culture among the Indo-Germanic peoples goes back into the darkest
past."

In Weber's view the Germanic tribes of Caesar's day were not no-
madic nor were the freemen a stratum of landlords (GrunSienen) who
left most work to slaves and women; slaves were not a substantial part
of the workforce and the status differentiation between warrior and
peasant did not exist at the beginning of recorded history; rather, the
Germanic freemen were transformed very gradually into the politically
disenfranchised and economically harassed peasants of the Middle Ages,

Weber accepted Meitzen's view that the German village with its land
distribution was a product of legal autonomy, a monopolistic association
of relative equals, not a product of manorial decree. However, in contrast

15. GAzSW, 517, 524.

V
4 ] Economic & Political Power X L V

to Meitzen's assumption of an equalitarian folk spirit, Weber took an
economically more realistic line and reasoned persuasively that the equal
parcelling out of land by a closed association pointed to the narrowing of
economic opportunities (land shortage), similar to the monopolistic
policies of medieval guilds, 1 *

In examining the Roman sources, Weber pointed out that Caesar's
report about the Suevi was no proof for a nomadic way of life of the
Germanic tribes. The Suevi, a frontier people, had developed into a group
of professional warriors, engaging in periodic raids on adjacent areas
and neglecting agriculture. This brought Weber to the phenomenon of
warrior communism and his most general point: the historical primacy
of political over economic factors:

If one wants at all to search for distant analogies such as might be
offered by the Kirghiz and Bedouins, the traits of an "autarkous state"
[an allusion to Ficnte's collectivist Utopia] found among the Suevi will
remind one much more of the robber communism that existed in
Antiquity on the Liparian islands or — if the expression be permitted —
the "officers' mess communism" of the ancient Spartans, or of the
grandiose booty communism of a Caliph Omar, In one phrase, these
traits are the outcome of "warrior communism." They can easily be
explained as a result of purely military interests. , . . They would
scarcely be in tune with the living conditions of a tribe stagnant at the
nomadic stage and ruled by great cattle-owners in* a patriarchal
manner, ...

The oldest social differentiation of Germanic and Mediterranean
prehistory is, as far as we can see, determined primarily politically, in
part religiously, not, however, primarily economically. Economic differ-
entiation must be considered more as a consequence and epiphenomenon
or, if you want it in the most fashionable terms, as a "function" of the
former, rather than vice versa. ...

If the term may be applied to prehistory at all, a "knightly" life
style . . . often goes together with a manorial position; in fact, this is
the rule once private hereditary landownership has fully developed. : . .
However, it is by no means generally true that this life style leads to,
or is related to, manorial superordination over other freemen — in the
age of Homer and Hesiod as little as in that of the Germanic epics.
It means a reversal of the usual causal relationship to view the later
manorial constitution not as a consequence but as the original basis of
the priviliged position of the high-ranking families. The historical
primacy of manorial domination appears highly unlikely, first of all,
because in an age of land surplus mere land ownership could not very
well be the basis of economic power,"

16, This is again the phenomenon of closed economic relationships treated in
Part Two, ch. II : 2 below.

17. GAzSW, 523, 5; 4 f.

X L V I INTRODUCTION

Weber concluded his essay with a reminder about the triviality in-
herent in correct scholarly results and anticipated that the older view
would probably survive the recent challenges: "This may appear trivial.
But unfortunately, trivial results, by their very quality, are often the
correct ones."

It is from concrete historical issues such as these that Weber fash-
ioned, in Economy and Society, his contrast between patrimonial dom-
ination and charismatic rule. The joining of these military with religious
phenomena established the category of charismatic domination. 18

5, The Roman Empire and Imperial Germany

Weber had an early interest in the comparison and comparability of
Imperial Germany and Imperial Rome. On this score he was close to
Theodor Mommsen, who described the Roman Republic in the terms
of liberal political theory and polemicized against Imperial Germany
with analogies from Antiquity. In the academic public Weber's com-
parative interest was at first not widely noticed- The Roman Agrarian
History proved technically too difficult to be understood by more than a
very small group of scholars. Alfred Heuss, today counted among the
foremost Roman historians, has pointed out that Weber

was the first to take the Roman agrarian writers {Cato, Varro, Columella)
seriously, examining them in a matter-of-fact way . . . and uncovering
the crass principles of Roman agrarian capitalism in its technical details.
In this respect, the book, although generally neglected by the historians,
became path-breaking, and subsequent research had to continue along
its line of inquiry, , . , Who else among the historians of the time was
capable of handling the legal sources and the technical language of land
surveyors, both of which Weber combined in a virtuoso fashion? The
book, hard to understand because of its dry and remote subject matter,
is an ingenious work. 1 *

Among the historians of the time the aged Mommsen was best
qualified to judge Weber's work. He hailed its publication and welcomed
its author onto his previously exclusive ground: the borderlines of
Roman private and public law. As early as the occasion of Weber's
doctoral defense Mommsen had said: "When the time comes for me to
descend into the grave, there is no one to whom I would rather say:
'Son, here is my spear, it has become too heavy for my arm/ than Max

18. Specifically, booty and military communism is treated in Part Two, ch.
XIV: 6.

19. Alfred Heuss, "Max Webers Bedentung fur die Geschichte des griechisch-
romischen Altertums," Historische Zeitschrift, vol. 201, 1965, 535.

The Roman Empire and Imperial Germany X L V 1 1

Weber/' 10 However, Weber did not become his successor and quickly
moved beyond the confines of ancient history. In the early nineties he
involved himself in a questionnaire study of the conditions of rural
laborers conducted under the auspices of the Verein fur Sozial-poliHk,
the most important association of professors, politicians and higher civil
servants for the study of the Social Question in Imperial Germai.y. Be-
tween 1892 and 1894 Weber published extensively on farm labor, and,
in contrast to the Roman Agrarian History, his new writings did attract
considerable attention. Weber's turn of interest was acknowledged with
the offer of an economics chair at the University of Freiburg, which he
accepted in 1894; this was an extraordinary offer for a jurist — not even
the usual "rehabilitation" (that is, the writing of a second Habilitation
to qualify in a different academic field) was required.

In Freiburg Weber delivered a popular lecture on "The Social
Causes of the Decay of Ancient Civilization" (1896). 21 The major po-
litical link between his studies of Antiquity and of East Elbia was the
1 problem of the "rise and fall of empire." The common theme was the
self-destruction of empire through the cleavage between the rich and the
poor. In the Roman Agrarian History Weber had searched for the
"social strata and economic interest groups" behind the expansionism of
the Empire and the unparalleled capitalist exploitation: "It is likely that
the political domination of a large polity has never been so lucrative." 22
The Roman state suffered from a "convulsive sickness of its social body."
Weber freely stated his value judgment. The transition from the con-
dition of the barrack slaves to that of hereditarily attached peasants, who
were permitted families of their own and conditional land use, appeared
to him a decisive change for the better:

The moral significance of this development need scarcely be empha-
sized. One must remember that at the beginning of the Empire Bebel's
ideal of legal marriage [i.e., freely contracted and dissoluble marriage]
was realized de facto among the upper strata, de jure for citizens in
general. The consequences are known. In this study it has not been
possible to show the connection between the influence of the Christian
ideai of marriage and this economic development, but it should be
obvious that the separation of the slaves from the manorial household
was an element of profound internal recovery (Gesundung), which

10. Marianne Weber, Max Weber. Ein Lebensbild (Tubingen: Mohr, 1926),
in — (henceforth cited as Lebensbild").

2i, "Die sozialen Griinde des Untergangs der antiken Kultur," in GAzSW,
289-31 1; a translation by Christian Mackauer in Journal of General Education,
V, 1950-51, 75-88.

22. Agrargeschichte, 6.

X L V I I I INTRODUCTION

was by no means bought too dearly with the relapse of the "upper ten
thousand" into centuries of barbarism. 23

Weber saw the social developments in East Elbia against the back-
ground of Roman history. He observed with apprehension the proletariza-
tion of the peasants in the second half of the 1 9th century. The manorial
Junkers gradually turned into capitalist entrepreneurs; they preferred
cheap seasonal labor — little more than barrack slaves — from beyond the
Russian frontier to a permanent and landowning German workforce.
Weber foresaw grave dangers in the Junkers' labor and tariff policies and
rejected their hollow claim to be the military pillars of the Empire even
as they undermined it socially and economically. He warned his elders
in the Verein fur Sozialpolitik in 1893 tnat " tne most horrible of all
horrors is a landowning proletariat for whom the inherited land has
become a curse." 14

In his 1896 Freiburg address Weber repeated his judgments and
cautioned his classically educated audience against its ready belief that
the decline of the Roman Empire could provide lessons for the solution
of modern social problems. He even went so far as to label the topic as
"merely of historic interest." But this was primarily a didactic stricture.
He did mean to teach his listeners something about the relative im-
portance of the economic factor and of social changes in the lower
strata. An intellectual and political culture should not be viewed in iso-
lation from the economic and social structure, as the Humanists had
done up to Jakob Burckhardt, and as the classical schools were still
doing; basic shifts in the mode and division of labor, and especially 1
economic and cultural changes within the lower strata, could be his-
torically as significant as changes in the ruling groups and their culture.
Imperial Germany faced such shifts with the growth of its industrial

23. Ibid., 274^ Weber's view was later detailed by Marianne Weber,
Ehefrau und Mutter in der Rechtsewtwicitlwng (Tubingen: Moht, 1907); on
marriage in the Roman upper classes, 168-173, on slavery, marriage and Christi-
anity, 177-187, on Bebel, 80, This voluminous comparative study, which Weber
suggested to his wife and in which he took a hand, should be seen as the back-
ground for the cursory treatment of marriage and property rights in chs. Ill and
IV of Part Two below.

The sudden ironic reference to August Bebel, after many highly technical
pages, is to the most popular socialist book of the time, Woman and Socialism
(1879), esp. ch. 28. In the 9th edition of 1891, Bebel popularized Friedrich
Engels' The Origin of the Family, Private Vmperty and the State (1884), the
Marxist sequel to Lewis H. Morgan's Ancient Society (1877). Throughout his
career Weber gave attention to the socialist theory of marriage and property.
For the last statement ( 1919/20), see Economic History, 20.

24. "Die landliche Arbeitsverfassung," GAzSW, 46%.

The Roman Empire and Imperial Germany X L I X

and agrarian proletariat, although her specific troubles were largely the
opposite of those that had brought down the Roman Empire.

Weber presented a simplified version of his explanation for the
decline of the Roman Empire— later part of his economic theory of the
ancient states: With the stabilization of the Empire the flow of new
slaves, the chief capital good of ancient capitalism, began to dwindle.
Commerce waned. Administering the vast conquered inland areas with
the means of a maritime city state proved increasingly difficult, The
Iatifundia established themselves as administrative unite independent of
the cities. Local troops replaced the standing army that had been largely
self-perpetuating, up to one half of the recruits being the sons of soldiers.
As economy and culture became rural, cosmopolitanism vanished. Thus
the economic development of Antiquity, which had started out as a
localized subsistence economy, came full circle. However, for Weber this
circularity (Kreislauf) did not involve morphological assumptions in the
mode of Oswald Spengler.

The disintegration of the Empire was a problem of super- and sub-
structure: "In essence, the decline meant merely that the urban ad-
ministrative apparatus disappeared, and with it die political superstruc-
ture dependent upon a money economy, since it was no longer adapted
to the economic substructure with its natural economy." 18 What had
been an urban substructure, the money economy and commerce, became
a superstructure without sustaining basis as the shift occurred from a
maritime to an inland economy. Thus Weber handled the relationship
; of super- and substructure in terms of geographical shift as well as time
sequence.

Throughout the address, Weber used various comparative devices.
He began with the similarities of the ancient and the medieval city in
order to identify the causes for their difference; the more similarities he
found, the more he could narrow down the area of crucial difference. In
order to clarify the dissolution of the ancient municipalities, he resorted
to a negative contemporary analogy, the resistance of the Prussian
Junkers to the administrative incorporation of their estates into the rural
"communes" (Ijmdgerneinden),** and he contrasted the familiar me-
dieval and modern flight from the land with the late Roman flight from
the cities. He made the military discipline of the Roman slaves more
understandable to his listeners by comparing it illustratively to an ex-
perience they knew: military service with its regimented barrack life

a;. "Die sorialen Griinde . . . ," GAzSW, 308.
. 16. On the Prussian GitUbedrke, the 7«»k*r-mled
low, eh. XVI:v, n. 9 Cp. '3^9)>

'estate-districts," see he-

INTRODUCTION

for the unmarried recruits ("slaves"), who were drilled by married no.
commissioned officers Q'viUici"^). Comparing the slaves on the Roman
latifundia with those on the Carolingian estates, Weber pointed to the
decisive difference: the latter were permitted a family and the use of
land upon their separation from the lord's oifeos.

6. The Economic Theory of Antiquity

Weber's most comprehensive work on Antiquity was written shortly
before Economy and Society. Behind the title "Agrarian Conditions in
Antiquity"" was hidden nothing less than a. comparative social and
economic study of Mesopotamia, Egypt, Israel, Greece, the Hellenist
realm, and Republican and Imperial Rome. Alfred Heuss called it "the
most original, daring and persuasive analysis ever made of the economic
and social development of Antiquity . . . the area in which Weber's
judgment, especially in the details, was most sovereign and surefooted,
... a claim that stands although he was even more 'original' in the
sociology of religion." 28

In contrast to Economy and Society, the. study focussed on an eco-
nomic and politico-military typology and did not yet include the cate-
gories of legitimate domination. It should be noted that in Weber's
thinking the category of appropriation, both of economic and military
resources, is older than that of legitimacy; furthermore, that differences
in the mode of appropriation in both areas remained equally important
to him.'

Whether a military constitution rests on the principle of self-
equipment or that of provisioning by the warlord who supplies horses,
arms and food, is as fundamental a distinction for social history as is

zj. "Agrarverhaltnisse im Altertum," GAzSW, 1-288; originally published
in the HandtvdrteTiruch der Sutatswissenschaften, third ed. (1909), vol. I, 52-
188. The restricted title was determined by the division of the handbook. The ten-
page annotated bibliography should be consulted for Economy and Society. The
book-length study was dashed off in four months in 1908, a feat made possible
by the fact that Weber had done his thinking ahead of the period of writing and
was thoroughly familiar with the literature.

Webef seems to have divided some of the subject matter with Rostovzeff, who
contributed the handbook article on coloni. Rostovzeff, who in the United States
became much better known than Weber as an ancient economic historian, was
one of the few to utilize Weber's analysis. Other historians rediscovered some of
Weber's results after the First World War — another instance of the discontinuity
that plagues most scholarly disciplines. By and large, it still appears that Weber's
ancient studies have not yet been followed through sufficiently.

28. Heuss, loc. cit., 538.

An Economic Theory of Antiquity

another: whether the means of production are owned by the workers
or appropriated by a capitalist entrepreneur. 1 '

Given this perspective Weber set himself the task of relating the
ancient economy to the major political structures. Almost incidentally,
he further clarified his comparative approach. Two issues stood out:
CO, If there are no universal evolutionary stages, at any rate, if they
cannot be identified historically, what kind of typology is suitable for
analysis? (z) If the categories of economic history appropriate for
medieval and modem conditions are not applicable to Antiquity, which
conceptual alternatives should be used?

As against evolutionary conceptions, Weber advanced a limited
developmental scheme that left the actual historical sequences open
and put in their stead logical "states" or "conditions" — a model-building
device that became basic for Economy and Society. This was a "static"
approach only in comparison with evolutionary sequences. Weber argued
that ancient social history had no visible starting point, since most his-
torical phenomena appeared to be secondary, militarily determined,
developments, such as the phratries, phylae and tribus. Nothing reliable
was known about the primeval rural structure. For Weber even the
"plausible hypothesis" that the ruling families at least originated as no-
madic conquerors was not generally acceptable, since the aristocratic
polity developed at the Mediterranean coast and could be proven to
have other origins; the starting points were lost in the darkness of pre*
history. All that could be historically reconstructed were "certain or-
ganizational states, which apparendy repeated themselves to some extent
in all those ancient peoples, from the Seine to the Euphrates, that had
at least some urban development." 10

Weber began his analysis with a series of brief comparisons that
linked up with his reasoning in "The Controversy About Ancient Ger-
manic Social Structure." European and Asian agrarian history differed
in a crucial category; land appropriation. Comparing the courje of early
' setdement in Europe and Asia, Weber saw the former proceeding from
initial nomadic livestock raising to mixed crop and livestock agriculture,
the latter from nomadic crop raising to intensive agriculture of a garden-
ing type. Hence the development in Europe, but relative absence in Asia,
of communal property in grazing grounds.

Next, Weber compared ancient and medieval agriculture in the
Occident. In both cases agriculture intensified with the narrowing of
economic opportunities. Agricultural preoccupation made the majority

29. Cf. Economic History, 137, for a slightly different wording,

30. "Agrarverhaltnisse . . . ," GAzSW, 35.

L I I INTRODUCTION

of men economically unavailable for 'military Service. Thus arose the
professional warriors who exploited the masses. Weber defined feudalism
in a manner transcending the medieval case. This enabled him to point
to the decisive difference between the ancient and the medieval condi-
tions. Medieval feudalism dispersed the warriors over the countryside
as manorial lords (Grunctfierren); ancient feudalism was urban: the
warriors lived together in the polis. ■

In this development military technology was partly cause, partly
epiphenomenon. Weber emphasized that In Antiquity, in contrast to the
Middle Ages, both the diffusion of superior military techniques and the
spread of commerce occurred by sea. Whereas central and western
Europe became manorial and feudal at a time when trade by land had
declined, "feudal" development in Antiquityled to the creation of the
city state. This centralization had the consequence that citizenship was a
much firmer bond than were the ties of personal loyalty typical, of de-
centralized medieval feudalism.

At this point Weber cautioned again not to mistake analogy for
identity:

The relationship of ancient urban feudalism to the exchange
economy is reminiscent of the rise of the free crafts in our medieval
cities, the decline of patrician rule, the latent, struggle between Urban
and manorial economy, and the disintegration or the feudal polity
under the impact of the money economy. . • • But these ever present
analogies with medieval and modem phenomena are frequendy most
unreliable and often outright detrimental to unbiassed comprehension.
. . , Ancient civilization has specific characteristics that distinguish it
sharply from the medieval and the modem."

Weber listed a series of features: Ancient civilization centered on the
coasts and the rive*|: trade was widespread andhigbly profitable, but
lacked the volume itnad in the late Middle Ages; the great ancient em-
pires were more mercantilist than the modern Mercantilist states; private
trade was insufficiently developed to guarantee the politically crucial
grain supply of the urban centers, which maintained a consumer pro-
letariat of declassed citizens, not a working class; slavery was more im-
portant than in the Middle Ages. 31

These comparisons led Weber to the issue, heatedly debated for
many decades, whether the categories of modern and medieval eco-
nomic history were appropriate for Antiquity. In the eighteen-sixties

31. Ibid., 4.

32. Weber conceded that in earlier writings he had overestimated the im-
portance of slavery relative to free labor, but insisted that in the classic period of
the "free" polities slavery was especially important, Ci. GAzSW, 7—1 1, as against
his older view, ibid., 293.

An Economic Theory of Antiquity

LIII

Karl Rodbertus, "himself a country squire, had investigated the master's
extended household (the oihos") as die dominant Unit of ancient econ-
omy; he also gave much attendon to ancient capitalism. As a scholar of
.Antiquity, the conservative socialist Rodbertus surpassed Marx, who had
labelled the agrarian developments the "secret history of the Romans,"
Karl Bucher, whose work proceeded from Rodbertus, Marx, Engels and
Schmoller, accepted the oihos as-one st^ge, within his influential scheme
of economic development — household, urban an'd national economy.**
Biicher, who believed in the "lawful course'of economic development"
(Preface, «*), was criticized by Eduard Meyer, who denied the neefl-
for particular economic concepts in the study" of Antiquity. Weber, in
turn, warned of the futility of Meyer's approach: "Nothing could be
more dangerous than to conceive of ancient conditions as 'modern.'
Whoever does it underestimates, as so often happens, the structural
differences. . . .""*

Weber recognized the importance of the oijfcos, but viewed it, within
the Roman context, as the "developmental product" of the Imperial
period and as the transition to medieval feudalism; by contrast, the Ori-
ental oihos had existed from the beginning of history. As against Rod'
bertus, who saw the oi&os developing directly out of the self-sufficient
household, Weber pointed for thfe Chient to its origins in the irrigation
economy and trade profit-: The early military chieftains were also
merchants.

Weber affirmed that Antiquity had a capitalist economy "to a degree
relevant for cultural history." He opposed the view that there had been
no capitalism because the large-scale enterprise with free and differenti-
ated labor was absent. Such an approach focussed too narrowly, he
thought, on the social problems of modem capitalism. Instead, he in-
sisted on a purely economic concept of capitalism: "If the terminology
is to have any classificatory value at all," capital must mean private
acquisitive capital (Enverbskapital') used for profit in an exchange
economy. - '* In this sense the "greatest" periods or Antiquity did have
capitalism. The ancient polis began with ground rents and tributes
collected by the ruler and the. patriciate; its economic prosperity was

33. Cf. Karl Rodbertus, "Zuc Gaochichte der romijehen Tribute teuern seit
Augustus," Jahrbiicher fiir NatiottplQkonomie urtd Statistik, V, 1865, 241-315;
"Zur Frage des Sachwerts des Geldes im A'ttrtuW k*- cit -> XIV, 1870, 341-
410; Karl Marx, Das Kapital, in Vferke, r/o\- 23 (Berlin: Die a, 1962), 96; Karl
Biicher, Die Entstehung der Volfcswirtsc^ft (14th ed.; Tubingen: Laupp,
1920), 83-160 — first published in 1893" as a collection of older articles; an
English edition s.t. Industrie I Evolution (New York: Holt, 1 901).

34. GAzSW, 10.

35. Ibid., 13.

LI V INTRODUCTION

; politically determined. However, the mere tendering of tributes to per-
sonal rulers lay outside the realm of capitalism and the exchange econ-
omy. In this case neither the rent-yielding land nor the retainers could
be considered "capital," since domination had a traditional, not a market
basis: it was manorial domination (Gmndherrschaft). When the land-
owners leased land in an exchange economy, ownership became a
capitalist rent fund. But the capitalist enterprise proper came into exist-
ence only when both land and slaves became transferrable on the
market. The classic cities did not have large-scale private enterprise for
any length of time. There was no qualitative division of labor; instead of
machinery, debt serfs and purchased slaves were used; the crafts played
a secondary role, and the guilds remained unimportant. Much of the
ancient economy, then, was a "mixed economy," partly manorial, partly
capitalist.

Weber considered the political and administrative structure of the
ancient states decisive for the fate of capitalism. The state administra-
tion, especially public finance, constituted the biggest enterprise. Only in
the city state, which lacked a bureaucratic apparatus for the administra-
tion of its territories, could public finances act as a pacemaker for private
capital formation — because the polity was for its financing dependent
upon the private tax farmer. Weber pointed to a major difference be-
tween monarchic and republican states: Ancient capitalism culminated
in the Roman Republic, where the public lands became the object of
the crassest form of private exploitation. The monarchies constricted
capitalism; in the interest of dynastic continuity they were concerned
with the subjects' loyalty. In the city republic the primary goal was
capitalist exploitation, in the monarchy it was political stability. "In
republics tax-farming is always at the ready to turn the state into an
enterprise of the state creditors and tax-farmers in the manner of
medieval Genoa." Whereas the city state allowed private capital ac-
cumulation of a highly unstable kind, the bureaucratic order of the
monarchic state economy gradually destroyed the opportunities for
private gain. "The monarchic order, so beneficial for the masses of the
subjects, was the death of capitalist development and of everything
dependent on it" M

y. A Political Typology of Antiquity

Beyond the contrast between republics and monarchies, well-known
from ancient political theory, Weber elaborated a developmental scheme

36. Ibid., 19 and 31.

A Political Typology of Antiquity

with open historical direction. Apart from its classifkatory uses, -he hoped
that it would remind the reader of the very different stages of develop-
ment at which the polities entered the light of history — depending on
the "accidental" availability of the sources. In contrast to Greece, Meso-
potamia and Egypt had had some kind of urban culture «rnny centuries
before the first records were made.

Weber based his typology on the "military constitution" and dis-
tinguished :

i. the merely fortified location; n. the petty "castle kings"; hi. the clan
polity; iv. the bureaucratic urban principality; v. the liturgic monarchy;
vi. the polis of privileged citizens; vn. the democratic polis; and outside
the scheme, vm, the military peasant confraternity.

i. The distant forerunner of the city is the walled settlement. House-
hold and village constitute the organizational environment of the in-
dividual. Associations for blood revenge, cultic activities, and defense
provide police, sacral and political protection, but nothing historically
certain can be established about the functional division or overlap of
these early associations which come out of prehistory. Free members
share in the landed property; the extent of slavery seems to be moderate.
Political chieftains, if they exist at all, have mainly arbitrational func-
tions. "It depends on the political situation whether there are any joint
political affairs. "'"

ii. A closer forerunner of the city is the castle controlled by an
owner of land, slaves, cattle and precious metals, that is, a ruler with a
persona] following. Almost nothing is known about the state of the
countryside. The exploitation of the subjects seems to have varied
greatly. Fertile land and trade profits led to the rise of these "castle
kings"; their law was set against popular law. The separation of the
followers from the rural population was important; according to tradition
and fact, the following often consisted of bands of aliens and ad-
venturers ("robber bands"). The ancient states originated in ■the victory
of one "castle king" over others.

in. Another approximation to the classic polis is the clan polity
(Adelssiaat'). The nobility is made up of creditors who develop into a
stratum of landed rentiers. The peasants become first debt serfs and
then hereditary dependents. A group of noble families that have accumu-
lated enough land and retainers to ^quip and train themselves as profes-
sional warriors rules the countryside from an acropolis. The "king" loses
influence and becomes primus inter pares in a militarily organized urban
community (in contrast to the feudal-manorial development of the

37. Ibid., 36. Weber deals here with the relatively "universal groups" to
which he returned again below, in Part Two, chs. Ill— VI and VIII.

LVI INTRODUCTION

continental Middle Ages). There is no bureaucracy; at most there are
elected officials. The peasants may be legally separate from the status
group of free men, but ancient trial and debt procedures as well as the
manipulation of the courts by the ruling class are sufficient to maintain
the social distance without formal barriers.

rv. From state n (the "casde kingship") development may proceed
in a direction contrary to state hi: The king may succeed in effectively
subordinating his following and in establishing an officialdom through
which he governs the "subjects." In this case the city is not autonomous
(witness Egypt, Assur and Babylon). The economy may approach "state
socialism" or an exchange economy, depending on the mode of want
satisfaction of- the royal household. Under condition in and iv the extent
of the direct utilization of the labor force by the rulers is inversely cor-
related with the development of the private exchange economy. Insofar
as domination rests on taxation, free transfer of real estate may be
tolerated. However, the bureaucratic king tends to oppose land accumu-
lation by the aristocracy, whereas he may permit land fragmentation.
Witness the Greek tyrants — and Napoleon I.

v. With the rationalization of royal want satisfaction the bureau-
cratic city or river kingdom may develop into the authoritarian liturgy
state, which meets its demands through "an artful system of compulsory
services and treats the subjects as mere objects." 18 Even in such a state
there may be free trade and geographical mobility, as long as they pro-
duce revenue. In fact, the state may favor both, in the manner of the
"enlightened despotism" of the 17th and 18th century — another illus-
trative analogy.

vi. This type emerges from state hi, but not without the most
heterogeneous transitions. It is the "polis of hoplites," in which the citi-
zens form a heavily armed infantry. The rule of the noble kinship
groups over the city and of the city over the countryside is broken. The
citizens' army of hoplites comprises all owners of land; hence military
service is relatively democratized.

vii. The, democratic polis proper is a further development of condi-
tion vi. Military service and even citizenship are emancipated from
the requirement of landownership, and there is an inconsistent trend
to formally qualify for office-holding everyone who has served in the
navy, a military branch not requiring self-equipment.

viii. A major case outside this typology is the association of peasants
organized as hoplites, which in some instances made history, from ancient
Israel to the medieval Swiss confederation.

38. Ibid., 40.

A Political Typology of Antiquity

LVII

One important dimension cuts across this typology of military-
political organization: "the manifest and latent struggle of the secular-
political and the theocratic powers, a struggle that affects the whole
structure of social life." 99 Functional specialization separated the primeval
linkage of princely and priesdy power. The priests became powerful
through their control of economic resources, their hold over the religious
anxieties of the masses, their possession of %ady "science" and, espe-
cially, their control of education in the bureaucratized states. This strug-
gle led to the historical ups and downs of secularization and restoration
in the "substantive development of culture," with usurpers ultimately
striving for legitimacy and hence restoration.

Thus did Weber assemble the elements that went into the making
of his Sociology of Domination in Economy and Society: patrimonialism,
feudalism, charisma (as military communism), the city and hierocracy.
In sum, Weber's ancient and medieval studies contain not only much
of the historical substance of the later work, but also its gradual con-
ceptualization.

8. Weber's Vision of the Future and His Academic Politics

Weber did not hesitate to draw political- lessons from academic
studies, but the relationship must be properly understood. He believed
that scholars should unflinchingly face the arduous work of fact-finding
and only then express political views. He insisted on detachment in
order to gain a hearing for his views — the basic strategy in his academic
politics. Sociology became for him a weapon in the struggle against the
predominant views 1 in the Verein fUr Sozialpolitik and the founding of
the German Sociological Association a vehicle for the same purpose.
The two great issues, closely related, were the social dynamics and future
of German society and the feasib&ty and desirability of value-neutrality
in social science.*

In warning of the political dangers he foresaw, Weber used his-
torical parallels, although he rejected the use of analogies for historical
explanation. Thus he appended one page of warnings to bis 1908 study of
Antiquity in order to impress his readers with vivid parallels. Without

$9. Ibid., 44.

40. On the tensions between politic! and scholarship in the men of die
V&rtm fur Sozu&poUtik, see Dieter Undenlaub, Richtungsktimpfe Jm Veran fUr
Saxidp&tik. Wvsetuchaft und Sozialpolitik tin Kaiserreicb (Wiesbaden: Steiner,
1967). This massive study will be the standard work on the politics of German
academic men during the period; the present introduction was still written inde-
pendendy of it

L V 1 1 1 INTRODUCTION

implying any historical inevitability he upheld — at least didactically —
the maxim: "If it has happened before, it may happen again." At issue
were the effects of bureaucratization :

The paralysis of private economic initiative through bureaucracy is
not limited to Antiquity. Every bureaucracy, including ours, has the
same tendency by virtue of its expansionism. In Antiquity the policies
of the city state paved the way for capitalism,- today capitalism is the
pacemaker for the bureaucratization of. the economy. Let us imagine coal,
iron and mining products, metallurgy, distilleries, sugar, tobacco, matches
— in short, all mass products that are already highly cartellized — taken
over by state-owned or state-controlled enterprises; let the crown domains,
entailed estates, and state-controlled resettlement holdings (Rentertgwter)
proliferate and let the "Kanitz motion" be passed and executed with all
its consequences; 41 let all military and civilian needs of the state ad-
ministration be met by state-operated workshops and cooperatives; let
shipping operations on inland waterways be compelled to use state tugs
[as partly realized in 1913], put the merchant marine under state super-
vision, have all railroads etc. nationalized, and perhaps subject cotton
imports to international agreements; let all these enterprises be man-
aged in bureaucratic "order," introduce itate-supervised syndicates, and
let the rest of the economy be regulated on the guild principle with
innumerable certificates of competency, academic and otherwise; let the
citizenry in general be of the rentier paisibl* type — then, under a mili-
tarist-dynastic regime, the condition of the late Roman Empire will have
been reached, albeit on a technologically more elaborate basis. After all,
the German burgher of today has retained scarcely more of his ancestors'
qualities from the medieval Town Leagues than the Athenean in '
Caesar's time had preserved those of the fighters at Marathon. "Order"
is the motto of the German burgher — even, in most cases, if he calls
himself a Social Democrat. It is very likely that the bureaucratization
of society will one day subdue capitalism just as it did in Antiquity.
Then the "anarchy of production" will be replaced by that "order"
which, in a ?ery similar way, characterized the late Roman Empire and,
even more, the New Kingdom and the rule of the Ptolemies in Egypt.
Let no one believe that the citizens' service in a barracked army, bureau-
cratically equipped, clothed, fed, drilled and commanded, can provide a
countervailing force to such bureaucratization or, more generally, that

41. Rentenguter were small holdings, indivisible and inalienable except with
government permission, created for the "inner colonization" (Germanics (km) of
the eastern part of the Reich, first under the Prussian resettlement act of 1 886. —
Count Kanitz, a Conservative Reichsteg deputy, in 1894 demanded the institution
of a state monopoly for grain imports in the interest of price supports for the out-
put of the grain-producing Junker estates of eastern Germany The so-called
"Kanitz motion" failed, but was thereafter resubmitted year after year by the
agrarian groups.

Vision of the Future and Academic Politics

LIX

modem conscription in dynastic states has any inner affinity with the
spirit of the citizenry-in-anns of the distant past. However, these per-
spectives do not belong here. 4 *

It is, of course, significant that Weber added these perspectives, in
spite of his disclaimer. In the fall of 1909 the Weber brothers, Max and
Alfred, clashed with an older generation of scholars at the Vienna meet-
ing of the Verein fur Sozudpolitik. Some younger members were critical
of the state metaphysics of men like Gustav von Schmoller and were
ready to go beyond their elders in matters of social reform, against them
with regard to democratization. The two Webers attacked the belief of
the older reform generation that strengthening the power of the state and
extending the economic functions of its bureaucracy would lead to
greater social harmony. Opposing the conservative State Socialism of the
aged Adolf Wagner, they pointed to the dangers of bureaucratization.
Economy and Society later demonstrated how the bureaucratic phe-
nomenon could be studied comparatively in a non-ideological way. But
at Vienna Weber expressed his sentiments and convictions, which
should be seen not only as the counterpoint, but as one of the motives,
for the Sociology of Domination. Weber granted to the older view of
bureaucracy — perhaps in part as a tactical concession — that

no machinery in the world functions so precisely as this apparatus of
men and, moreover, so cheaply. . . . When the Verein fur Sozialfdlitik
was founded [in 1872], the generation of Privy Councillor. Wagner
called for more than purely technical yardsticks in economic affairs; at
the time this group was just as small as we who think differently are
today in relation to you. Gentlemen, you then had to fight the salvo
of applause for the purely technological accomplishments o£ industrial
mechanization emanating from the laissez-faire doctrine. It appears to roe
that today you are in danger of providing such cheap applause to me-
chanical efficiency as an administrative and political criterion. ...
Rational calculation . . . reduces every worker to a cog in this [bureau-
cratic] machine and, seeing himself in this light, he will merely ask
how to transform himself from a little into a somewhat bigger cog, . . .
an attitude you find, just as in the Egyptian papyri, increasingly among
our civil servants and especially their successors, cur students. The
passion for bureaucratization at this meeting drives us to despair. 41

Weber was not opposed to the Verein fur SoztalppUtik as a propa-
ganda association, as he called it, but its academic activities were unduly
handicapped, he felt, by its ideological preoccupations. Hence, after the

41. GAzSW, 2 7 7f.
43. GAzSS, 4i 3 f.

L X INTRODUCTION

Vienna meeting, be proposed the founding of the German Sociological
Association — to be an instrument of collective empirical research and
"purely scientific discussions." In the winter of 1909/10 he suggested
team projects on the press, voluntary associations, and the relationship of
technology and culture. Weber apparently sustained most of the organiz-
ing effort. It was soon clear that his colleagues resisted project coopera-
tion and only hesitandy accepted organizational responsibilities. And
some men whose academic careers had suffered because of their novel
sociological interests, Weber noted with chagrin, viewed the association
as compensation for status deprivation— he spoke of a salon des refused.
The Sociological Association first met in the fall of 1910. Weber sum-
marized the intent of the statutes: "Hie association rejects, in principle
and definitely, all propaganda for action-oriented ideas from its midst."
He immediately added that this had nothing to do with general non-
partisanship or die "popular middle-of-the-road line"; rather, it meant
studying "what is, why something is the way it is, for what historical and
social -reasons."" Secondly, the association should not be an assembly
of notables for whom membership in one or another committee was a
matter of honor. Thirdly, the association should not engage in "empire-
building" and arrogate to itself tasks better left to decentralized study.

Sociology, then, was to be disciplined discourse and information
gathering, but sociologists should be politically articulate. Weber wanted
to separate the organizational setting for research from political action.
In the fall of 1912 he attempted to organize men from the left wing of
the Verein fur So&alpoUtik; a few met in Leipzig to arrange periodic
meetings on the failures and the future of welfare legislation and social
reform. Differences of opinion, however, proved too great and no further
meetings took place.**

At the second annual gathering of the German Sociological Associa-
tion Weber pleaded once more for the raison d'itre of the association,

44. VerhanMwtgen des Ersten Deutsche* Soziologentaget, Frankfurt, 19.-
22. Okt 1 9 10 (Tflbingen: Mohr, 19 11), 39I. On die contrast between scientifi c
assessment and ideological judgment and the need for a technical terminology,
see also Friedricfa von GotttOtdilienfeU, Die Herrschaft des Wortet (Jena:
Fischer, 1901). Weber esteemed this neglected work and acknowledged it in the
prefatory note to Economy and Society. Gotd wax one of the first expositor! and
defe nd er s of "jargon" in social science, that means, of terms removed from both
common sense meanings and ideological preference. On the definition of value-
neutrality (WerturteilsfreiheiO see Johannes Winckehnann's article in Historischet
WSrterbuch der Philosophie (forthcoming).

45. See Weber's post mortem circular to the participants dated Nov. 15, 191*1
in Bemhard Schafer, ed., "Ein Rundschreiben Max Webers zur Sozialpolitik,'*
Sortole Welt, XVIH, 1967,261-271.

Vision of the Future and Academic Politics

LXI

"somber discussion" and the study of "questions of fact," since the habit
of value judgment persisted As he later said: "Will the gendemen, none
of whom can manage to hold back his subjective 'valuations,' all infi-
nitely uninteresting to me, please stay with their kind. I am absolutely
tired of appearing time and again as the Don Quixote of an allegedly
unworkable approach and cf provoking embarrassing scenes." 4 '

This aggressive stand for detachment must be seen in the institu-
tional context of the time. Weber especially abhorred the misuse of the
rostrum for the indoctrination of the students, who could neither answer
nor argue. '"The least tolerable of all prophecies is surely the professor's
with its highly personal tinge." 47 However, many students indulged in
"zoological nationalism." In that case Weber's postulate involved the
attempt to face them with inconvenient facts. Weber also continued
Mommsen's struggle for. a "science without presuppositions" — Momm-
sen's war-cry against the repeated intrusion of religious criteria in aca-
demic appointments.

* Weber's advocacy of field and survey research, a crucial part of his
notion of "value-neutral" fact-finding, 4 " put him ahead of most of his
colleagues, but here he was also his own worst enemy. He was quite
successful at raising funds and opening channels for the large-scale
projects of the Sociological Association, yet he was not well-suited for the
role of project or institute director who furthers research by diplomati-
cally avoiding controversy with clients and colleagues. The press study
did not materialize when Weber withdrew as director to avoid biassing
the project: Early in 191 1 he had begun a lawsuit to force a newspaper
to reveal a slanderous source, a move that made him controversial in
some press circles. 4 * Weber was never content to be a mere student of
law; in the nineties he had practiced law along with his teaching and
writing. He considered the suit an honorable and pragmatic form of
normatively controlled struggle—one of his major scholarly concerns.

46. Marianne Weber, Lebensbitd, 430.

47. Ibid., 33$. <*

48. On the pioneering efforts of Weber and Tonnies, see Anthony R. Ober-
sdull, Empirical Social Research in Germany, 1848— 191 4 (The Hague: Mouton,
1965). Weber and Tonnies Stood firmly together in their advocacy of field and
survey research. Tonnies strongly backed Weber's notion of value-neutral sociol-
ogy against Troeltsch. See Ferdinand Tonnies, 'Troeltsch und die Philosophic
dei CeschJchte," in his Soxiologtsche Studitn und Krittken (Jena: Fischer, 1926),
4ioi.

49. For Weber's explanation see Verhandlungpn des Zweiten Devtschen
Soiioiogentagts, Berlin, 20.-22. Okt. 1912 (Tubingen: Mohr, 191 3}, 75ff. On
the background of the suit, see below, p. 354, n. 6.

L X 1 1 INTRODUCTION

His willingness to fight openly, and to sue if necessary, in academic and
personal affairs made him a highly inconvenient man and tended to
impair his effectiveness as a,n organizer of academic enterprises, Weber
persistendy criticized the corporate failings of the professorial estate. His
articles and statements on academic improprieties, the general state of
the universities and the need for university reform elicited the public
counter-attack, at one time or another, of groups of professors and officials
of the ministries of education."* In general, his intellectual, political and
moral demands were beyond the capabilities of most of his colleagues.
At any rate, in 1912 Weber withdrew completely from his executive
duties in the Sociological Association: "I must return now to my sci-
entific work. Things can't go on this way, I am the only one to sacrifice
personal scholarly interests, yet I have achieved no more than the bare
running of a coasting machine/'" The work to which he returned was
Economy and Society.

9. The Planning of Economy and Society

Marianne Weber reminisced in her husband's biography that
Economy and Society "unintendedly grew into the major work of his
life."** The impetus came from Paul Siebeck, publisher of the famed
Archiv fur Sozicdwissenschaft und Sozialpolitik, which Weber, Werner
Sombart and Edgar jaffe had taken over in 1904. In 1909 Siebeck pro-
posed to replace the outdated Handbuch der -poliHschen Oehonomie
edited by Gustav Schonberg in the eighteen-eighties," which among two
dozen contributions contained Schonberg's theory of economic stages
(2nd ed., I, 25-45; criticized below on p. 117) and August Meitzen's
rationale for agrarian research from a liberal point of view (2nd ed., II,
149-224). Weber agreed to edit an entirely new series. However, the
fact that this was a new venture did not prevent an acrimonious aca-
demic row, when a young professor who had failed to find contributors
for a revised edition qf the old handbook accused the publisher and, by
implication, Weber of slighting the financial interests of Schonberg's
impoverished heirs. Weber came to Siebeck's defense; the young man^
in rum, mobilized a group of older professors and threatened a public

50. For an account, see Marianne Weber, Lebenibitd, 413-17, 430-56.

51. Ibid., 429.
51. Ibid., 425.

53. Gustav Schonberg (ed.), Handbuch der Potitischen Oekanomie (2 vols.;
Tubingen: Laupp, 1882; 2nd revised and enlarged ed. in 3 vols., 1885-86).

The Planning of Economy and Society

LXIII

scandal, In the ensuing morality play Weber's acute sense of honor and
propriety was once again engaged." 4

The old handbook was limited to the traditional topics of political
economy. Weber titled his series Outline of Social Economics (Grund-
riss der Soztalokonomiky, the term, wider than "institutional economics"
and less inclusive than "sociology," enabled him to encompass all rela-
tionships of economy and society. He asked a number of men for con-
tributions to be completed within two years. However, some failed in
their promises, others produced disappointing manuscripts, still others
were dismayed as their contributions were outdated by the resulting
delays. The first volumes did not appear until 1914; then the war in-
terrupted the venture. The series closed in 1 930 with more than a dozen
volumes published. Among contributors well-known in the United
States were Robert Michels, Werner Sombart, Joseph Schumpeter, Emil
Lederer, Karl Bucher and Alfred Weber. Some tides in the series were:
The Economy and the Science of Economics; Economic Theory; Econ-
omy and Nature; Modern Capitalist Economy; Social Stratification
Under Capitalism; Welfare Politics Under Capitalism; Foreign Trade
and Trade Policies; there were also several volumes on primary, sec-
ondary and tertiary industries.

As the coordination troubles of the projected series mounted, Weber
expanded his own contribution. Without this exigency, he might never
have attempted a summa of his sociology, given his absorption in other
interests and his conviction of the "futility of the idea . . - that it could
he the goal of the cultural sciences, no matter how distant, to construct
a closed system of concepts which can encompass and classify reality in
some definitive manner and from which it can be deduced again." 5 *
Now, however, he was motivated to attempt his own historically open
systematization ; "Since it was impossible to find a substitute for some
[promised but unwritten] contributions, I concluded that I should write
a rather comprehensive sociological treatise, for the section on Economy
and Society, to provide an equivalent presentation and to improve, the
quality of the series. I had to sacrifice other projects much more impor-
tant to me; in other circumstances I would never have taken on such a
task." His wife saw through these complaints: "At last he was under
the spell of a great unified task."**

In his 1914 introduction to the series Weber spelled out the rationale

54. Marianne Weber, Lebensbild, 446-453.

55. GAzW, 184; cf. Shils arid Finch (eds.), Methodology . . . , 84.

56. Marianne Weber, Lebensbild, 424.

L X I V INTRODUCTION

of the project: "The basic idea was to study economic development
particularly as part of the general rationalization of life. In view of the
systematic character of the work the addition of a general economic
history has not been planned for the time being.""

Tracing the historical lines of rationalization was certainly one of
Weber's intentions in Economy and Society, as is also indicated by
scattered remarks in the text (for example, below, 333). However, the
work is not primarily a study in the rationalization and the "disenchant-
ment" of the world,** In a letter of June 11, 1914, Weber explained to
the redoubtable medievalist Georg von Below his specifically sociological
intention:

This winter I will probably begin with the printing of a fairly
voluminous contribution to the Outline of Social Economics. I am deal-
ing with the structure of the political organizations in a comparative
and systematic manner, at the risk of falling under the anathema:
"dilettantes compare." We are absolutely in accord that history should
establish what is specific to, say, the medieval city; but this is possible
only if we first find what ii missing in other cities (ancient, Chinese,
Islamic). And so it is with everything else. It is the subsequent task of
history to find a causal explanation for these specific traits, I cannot
believe that ultimately you think otherwise; some of your remarks speak
more for than against my assumption. Sociology, as I understand it, can
perform this very modest preparatory work. In this endeavor, it is un-
fortunately almost inevitable to give offense to the researcher who com-
pletely masters one broad field, since it is, after all, impossible to be a
specialist in oil areas. But this does not convince me of the scientific futility
of such work. Even my hastily written essay on ancient agrarian history
(in the Handwdrterhuch der Staatswissenschaften) has been useful, in-
cluding those findings that have been superseded. This seems tome proven

57. In Karl Biicher et al., Whtschaft und Whtschaftswissenschaft, Section I,
Vol. 1 of Grundriss der Sozudoionomik (2nd ed.; Tubingen: Mohr, 1924), vii.
Upon the urging of students, Weber turned to the task of a general economic
history in the winter of 1919/20. This was^us last completed lecture course.
After his death the lectures were reconstructed from student notes and published
as Wirtschaftsgeschickte. Abriss der universale*! Sozial- und Wirtschaftsgeschichte
(3rd ed.; Berlin: Duncker & Humblot, 1958), translated by Frank H. Knight as
General Economic History (New York: Green beig, 1927). The Economic History
suffers from various gaps; the English edition also omits the terminological intro-
duction. The work makes easier reading than Economy and Society jnsofar as it
treats phenomena such as the household, neighborhood, kin-group, village, and
manor in greater historical continuity; it is inferior in terminological and syste-
matic respects.

58. For an interpretation merely along this line, see Gunter Abramowski,
Das Geschichtsbild Max Webers. Universalgeschichte am Leitfaden des okzi-
dentalen Rationalisiemngsprozesses (Stuttgart: Klett, 1966).

The Planning of Economy and Society

LXV

by the dissertations of Wile ken's pupils in Leipzig. But the essay was
certainly no masterpiece. 5 '

In the same year — 1914 — Weber published a projected table of
contents for the Outline of Social Economics, including a detailed plan
for the manuscript (Part Two) he had written between 1910 and 1914
— Part One was written years later. The table of contents shows that
Section III of the Outline was titled "Economy and Society" and was
to contain two parts, "The Evolution of Systems and Ideals in Economic
Policy and Social Reform" by Eugen von Philippovich 60 and "The
Economy and the Normative and De Facto Powers" (Die Wirtschaft
und die gesellschaftlicken Ordnungen und Machte) by Weber. Econ-
omy and Society is not, then, the original title of Weber's work. The
title now used for Part Two of the work is the "true" one, if more
cumbersome in English. However, its meaning is not obvious. Weber
does not proceed from the national economy and its relation to society;
rather he begins with social action, of which economic action is that
rational case concerned with want-satisfaction under conditions of resource
scarcity and a limited number of possible actions. The basic "economy"
is the "household" in the archaic English sense; in common German
parlance Wirtschaft may refer to a farm or an inn as well as to the
national economy.

The "normative and de facto powers" are the laws and conventions,
on the one hand, and the groups that sustain them on the other. The
relationship between the normative and the merely coercive, between
legitimacy and force, is ever varying in the flux of ideal and material
interests and the vicissitudes of power struggle. There are no his-
torically effective ideas and ideals without social interests backing them,
and force is rarely used without at least the semblance of a rationale
before the staff and the subjects. The formulation of the title expresses
these dual forces that impinge on the individual's social action.

Weber's projected table of contents (of Part Two) compares with
the chapters of the English edition (in parentheses) as follows: 01

59. The letter is reprinted in the second edition of Georg von Below, Der
deutsche Stoat des Mittehdters (Leipzig: Quelle und Meyer, 1925), xxiv. The
dictum "dilettantes compare" was coined by Goethe and hurled by Heinrich
Brunner against representatives of the comparative method (cf. ibid., 333). —
Weber certainly addressed himself ad hominem, but more in emphasis than
content.

60. Published in Karl Bucher ex «!., op. tit., 126-183.

6 1.. The table of contents, which was included in the early volumes of the
Grutidriss der Soziddko-normk, is reprinted in Johannes Winckelmann, "Max
Webers Opus Posthunmm," Zeitschrift fiir die gesamten Staatswissenschaftett,
vol. 105, 1949, 37of. In this essay Winckelmann first proposed his reorganization

L X V I INTRODUCTION

i. Categories of the Varioas Forms of Social Order (part/)' contained
in ch. I:i-2, but -mostly in "On Some Categories of Interpretive
Sociology"; cf. Appendix I, below)

The Most General Relationships Between Economy and Law
(ch. I.4)
The Economic Relationships of Organized Groups (ch. II)

2. Household, Oikos and Enterprise (ch. IF)

3. Neighborhood, Kin Group and Local Community (ch. II

4. Ethnic Group Relationships (ch. V)

5. Religious Groups

The Class Basis of the Religions; Complex Religions and Eco-
nomic Orientation (ch. VI)

6. The Market (ch. VII)

7. The Political Association (ch. IX)

The Social Determinants of Legal Development (ch, VIII)
Status Groups, Classes, Parties (ch. IX:6)
The Nation (ch. IX; 5 )

8. Domination

a) The Three Types of Legitimate Domination (ch, X-X1V)

b) Political and Hierocratic Domination (ch. XV)

c) Non -Legitimate Domination. The Typology of Cities (ch.
XVI)

d) The Development of the Modern State

e) The Modern Political Parties

Weber died in 1920 before finishing either Part Two or the later,
Part One. The last two sections on the modern state and the modern
political parties remained unwritten. Weber's table of contents of Part
Two was not followed in the two editions undertaken by Marianne
Weber and Melchior Palyi (1922 and 1915) and the reprint of 1947
(third ed.). It was not until Johannes Winckelmann's edition of 1956
(fourth ed.) that the intended structure of the manuscript was largely
restored.

zo. The Structure of Economy and Society

The following remarks are not intended to summarize Economy and
Society, but to elucidate some of Weber's underlying reasoning as well as

of Wirtschaft und Gesellschaft. See also his introduction to the 1956 edition
(_WuG, xi-xvii); the preface for the 1964 paperback edition (WwG-Studienaus-
gahe, xv-xvi) indicates some further changes.

io;I]

Part Two: The Older Part

LXVII

some of the systematic connections among the chapters, irrespective of
their length. Particular attention will be given to the previously untrans-
lated chapters and sections and their relationship with the other parts.

I. part two: the earlier part

CH. I. THE ECONOMY AND SOCIAL NORMS: ON STAMMLER

Most books have a foil as well as a model. They are written to criti-
cize some books and emulate others. One visible starting point of
Economy and Society is the attempt at a positive statement of what
Rudolf Stammler "should have meant," as Weber put it in the prefatory
note to his essay "On Some Categories of Interpretive Sociology"
(i9i3),' !? This essay was part of a longer methodological introduction
to the work and corresponds to the first section in the 1914 outline,
"Categories of the Various Forms of Social Order,"

Like his friends Jellinek, Simmel and Sombart, Weber wrote a
critique of Stammler's Economy and Law According to the Materialist
Interpretation of History.'" Weber bluntly denied its "right to scientific
existence,""* but his critique was not identical with his objections to
historical materialism. Stammler, a neo-Kantian philosopher, claimed to
have systematically deduced the feasibility of objectively correct social
action and laid a new epistemological foundation for social science by
demonstrating the identity of social ideal and social law. He discussed
at great length the relations between legal and economic order and
denied their causal relationship in favor of their correspondence as form
and content, a position diametrically opposed to Weber's, who repeated
in Economy and Society (below, 32,5ft". and 32L) that his critique was
directed against (a) the confusion of the normative with the empirical
'validity of an order, (b) the confusion of regularities of action due to
normative orientation with merely factual regularities, (c) the contrast
between convention and, law in terms of free will — as if conventions

62. "Qber einige Kategorien der veistehenden Sozioiogie," Logos, IV, 1913,
reprinted in GAzW, 427. See also below, p. 4.

63. Cf. Rudolf Stammler, Wirtschaft und Recht tiach der materialist schen
Geschichtsauftassung. Eine sozialpkilosophische Untersuchurtg (2nd improved
ed,; Leipzig: Veit, 1906). For Stammler's definition of the task of the social
sciences and a summary of his theory, see 5748. Weber spoke on the difference
between Marx and Stammler at the 1910 meeting of the Sociological Association;
cf. Verhandlungen des Ersten Deutschen Soziologentages, 96.

64. "R. Stammler's 'Oberwindung' der materialistischen Geschichtsauffassung"
(1907), reprinted in GAzW, 291.

L XV III INTRODUCTION

were not coercive — , and (d) the identification of law and convention as
the "forms" of conduct as against its "substance."

As a trained jurist and economist Weber was faced with both the
normative orientation of jurisprudence and the ethical components of
laissez-faire and state-socialist economics. He could develop a sociological
approach only by insisting on the separation of the normative and the
empirical, a separation accomplished with his theory of social action. In
the essay on interpretive sociology and in Part Two of Economy and
Society he defined social action just as he did later in Part One: subjec-
tively meaningful action oriented to the behavior of others — it is called
Gemeinschaftshandeln in the older part and soziales Handeln in the
newer. Normatively regulated action is only one variant of social action.
"Sociology, insofar as it is concerned with law, deals not with the
logically correct 'objective' content of legal norms but with action for
which, among other considerations, the ideas of men about the meaning
and validity of certain regulations may play a significant role as both
determinants and resultants."* 1

Weber, elaborated a continuous typology of social action along the
line of increasing rational control, persistence and legal compulsion. This
typology — partly presented in Appendix I — ranges from mere consensual
action (Einv'ersUindniskandeln) and ad hoc agreement (Gelegenheits-
vergesellschaftung), through various kinds of regulated action and en-
during association (Vergesellschaftung), to the organization (yerband)
and compulsory institution (Anstalt). These kinds of action differ from
behavior that is not social or borderline: Massenhandeln, which may be 1
rendered "mass action," "statistically frequent action" or "collective
behavior."

In this scheme only men act, neither society nor individual groups.
However, men acting in concert form groups (.Gemeinsckaften), and
these persist only if they have a "constitution*' in the sociological sense,
that »s, if their order is consensually accepted by members (or outsiders)
for whatever reasons. Belief in legitimacy need not be the primary reason.
Therefore, Weber deals in the first chapter with the consequences of
the factual impact of law on economic conduct.

The economic order is made up of the actual control over goods and
services insofar as it is consensually recognized. Sociological economics,
then, deals with the actions of men insofar as they are conditioned "by
the necessity to take into account the facts of economic life." However,
in st rumen tally rational action must also take into account the fact of
law, defined empirically as "guaranteed law": A legal order exists when-
ever an association is ready to enforce it. Weber makes it immediately

65. GAzW, 440. Emphasis added.

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Part Two: The Older Part

LXIX

clear that law is by no means in all cases "guaranteed" by violence
CQewalt), and he rejects the view that "a state exists only if the
coercive means of the political community are superior to all other
communities" (below, 316).

The two basic categories of an order — convention and law — Weber
defines in close proximity to Sumner and in contrast to Stammler. Al-
though conventions are not safeguarded by men (a staff or apparatus)
specifically associated to uphold them, they can be enforced jus^ as
effectively as law by psychological, and even physical, coercion on the
part of the group members. Compliance with a conventional or legal
order is frequently determined by a person's self-interest in the continua-
tion of consensual action. Unreflecting habit is another universal reason
for regular and regulated behavior. The beginnings of convention and
law in habit, usage and custom lie in the realm of inaccessible prehistory.
Yet, in view of these powers of persistence, the historian must be able to
account for the innovating capacity of men. Rejecting older views of
imitation, Weber prefers Hellpach's theory of innovation through in-
spiration and empathy — an anticipation of the theory of charisma in
chs. VI and XIV.

Throughout his analysis, Weber combines his effort at terminological
precision with an insistently realistic approach to human affairs: Men
are creatures of habit, but they are also strongly motivated by their
material and ideal interests to circumvent conventional and legal rules;
in all societies the economically powerful tend to have a strong influence
on the enactment and interpretation of the law. However, the presence
of law, with its various forms of coercion, makes a great deal of difference
for social action. On a general level more cannot be said. Here as else-
where Weber carefully points out the limits of generalization: "The
exteitf^of the^'law's factual impact on economic conduct cannot be
determined generally, but must be calculated for each particular case."

CH. II: ON MARX, MICHELS AND SOMBART

Weber's emphasis on the limits of generalization has here a critical
thrust directed against historical materialism and economic functionalism
(below, 341). A" work on economy and society must sooner or later take
a stand on historical materialism — Weber took his stand at the first ap-
propriate moment. It would be wrong, however, to say that the critique
of historical materialism occupies the dominant place in the work, above
and beyond Weber's other polemical and positive interests. What may
appear at first sight as "reaction" Jo, or "reflection" of, historical material-
ism — such as Weber's interest in ancient capitalism — more often stands
in a tradition of economic and legal history of which Marxism was an

LXX

INTRODUCTION

extreme offshoot. Weber recognized historical materialism as a political
force but did not take its ultimate claims seriously. About the time this
chapter was written, he told his peers at the first meeting of the Socio-
logical Association :

I would like to protest the statement by one of the speakers that some
one factor, be it technology or economy, can be the "ultimate" or "true"
cause of another. If we look at the causal lines, we see them run, at one
time, from technical to economic and political matters, at another from
political to religious and economic ones, etc. There is no resting point.
In my opinion, the view of historical materialism, frequently espoused,
that the economic is in some sense the ultimate point in the chain of
causes is completely finished as a scientific proposition. flB

Weber also rejects economic functionalism insofar as it postulated an
unambiguous interdependence of economic and non-economic elements.
Not all social action is economically influenced, and not all groups are
economically relevant. Culturally important groups, however, have some
kind of relationship with economic elements; all persistent groups must
in some way meet their wants. Weber presents a simple typology of
economically active groups, ranging from economic groups proper,
through various economically active groups and those merely influenced
by economic factors, to regulatory group of a political, religious or other
nature. 87 (In line with the reasoning in ch. I, regulatory groups belong
into an economic typology of groups.)

Although Weber gave attention to the technological factor in history,
he related want satisfaction primarily to modes of appropriation and
expropriation, not to modes of production. The crucial importance of
appropriation appears at first sight as a "quasi-Marxist" position, but in
fact is another difference from Marx. Weber saw the Marxist concept
of the mode of production blurring the technological and economic
aspects. He explained before the Sociological Association:

To my knowledge, Marx has not defined technology. There are
many things in Marx that not only appear contradictory but actually
are found contrary to fact if we undertake a thorough and pedantic analy-
sis, as indeed we must. Among other things, there is an oft-quoted passage :
The hand-mill results in feudalism, the steam-mill in capitalism. That
is a technological, not an economic construction, and as an assertion it
is simply false, as we can clearly prove. For the age of the hand-mill,
which extended up to modem times, had cultural "super-structures" of
all conceivable kinds in all fields. es

66. Verhandlungen des Ersten Deutsche-n Soziologentages, 101.

67. In Part Two the economically active groups are called Getneinschaften,
in Part One Verbande ( organizations).

68. Verhandhmgen, of. cit., osf. The point is repeated below, 1091.

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Part Two: The Older Part

LXXI

Such superstructures are related to modes of appropriation, which
emerge from the competition for livelihood but also depend on the
nature of an object, material or immaterial. Weber does accept the
historical generalization that free property and acquired rights grew out
of the gradual appropriation by group members of their shares in the
group's holdings. Private property became important with the disintegra-
tion of the old monopolist associations. It is a recurrent process in history
that decreasing opportunities lead to monopolization; then legally privi-
leged groups with privileged members (JWhtsgewosseK) and organs
come into being. Weber lists the stages of the appropriation of oppor-
tunities through external and internal closure. With fine nominalist
irony lie mixes contemporary examples from Imperial Germany with
historically early illustrations (below, 342).

Once an organization has been established, the vested interests of the
organs (functionaries, officials) tend to perpetuate or transform it beyond
the original purpose. This phenomenon of institutionalization was a con-
troversial point between Weber and his friend Robert Michels, who was
just completing his Political Parties (191 i)."'- 1 Whereas Michels reified
his observations into the "iron law of oligarchy" and thus stressed the
sameness of the phenomena at issue, Weber pointed to the multiple, and
often contradictory, consequences of institutionalization, which might
lead to monopolization or expansionism (ch. 11:3). For Weber the
greatest historical example for the expansionist tendency was the age-
old connection of capitalist interests with imperialism. The expansionist
tendencies of an organization couid, however, be restrained by monopo-
list interests. In voluntary organizations the rational primary purpose
might be overshadowed by "communal" goals if social action involved
personal elements (below, 346), thus promoting closure and establishing
social legitimacy.

Irrespective of this dualism, most rationally organized groups must
satisfy ,heir wants in one or more of the following ways: (1) the oikos;
(2) market-oriented assessments; (3) production for the market; (4)
maecenatic support; (5) contributions and services linked to positive and
negative privileges (ch. 11:4).

With this typology Weber completes the economic framework for
the substantive theme that runs through all of Economy and Society:
the preconditions and the rise of modern capitalism. Subsequently, this

69. On the close intellectual relationship between Michels and Weber, see
my The Social Democrats in Imperial Germany (Totowa, N.J.: Bedminster Press,
1963), 249-157; cf. also Juan Linz, "Michels e il suo contributo alia sociologia
politica," introduction to Roberto Michels, La Sociologia del Partito politico nella
DemocTazia moderna (Bologna: I] Mulino, 1966), 7—1 iq.

L X X I I INTRODUCTION

problem is treated from several vantage points: the household and other
relatively universal groups (chs. III-V), religion (ch. VI), law (ch.
. VIII), political community (ch. IX), and the various kinds of rulership
(chs. X-XVI). This underlying theme, however, does not determine
the typological structure of the chapters; moreover, it is paralleled by the
themes of rationalization in religion, law and politics. In view of the
importance that Weber attributed to the political factor in his previous
work, it is no surprise that his first historical explanation (ch. 11:5)
concerns the way in which the fiscal and monetary policies of the modern
states made possible the rise and persistence of capitalism.

The issue of the origins of capitalism puts Economy and Society
besides the work that apparently was both inspiration and foil: Werner
Sombart's Modem Capitalism. 7 '' Its two massive volumes were published
in 1902, shordy before Weber began writing "The Protestant Ethic
and the Spirit of Capitalism." Sombart and Weber had been close allies
since the mid-nineties. Weber unsuccessfully tried to have Sombart
succeed him in Freiburg when he left for Heidelberg in 1897; in the
reactionary nineties — the so-called Era Stumm — official resistance to
Sombart was too strong. Both men shared a wide interest in the capitalist
enterprise, the spirit of capitalism, social reform and the labor move-
ment, and together they advocated the value-neutral approach in the
Arckiv jiir Sozialwissenschaft. Sombart was the more flamboyant of the
two and proved to be more mercurial. On the one hand, he demanded
"facts, facts, facts — this admonition rang in my ears all the time I was
writing the book." On the other, he also tried to explain them from
ultimate causes: "What separates me From Schmoller and his school is
the constructive element in the ordering of the material, the radical
postulate of a uniform explanation from last causes, the reconstruction
of all historical phenomena as a social system, in short, what I call the
specifically theoretical. I also might say: Karl Marx." 71

This was not much more than a rhetorical declaration exaggerating
the difference from his former teacher Schmoller. The work failed to
link the many facts with its postulate and showed that Sombart was

70. Werner Sombart, Der moderne Kapitalismus, vol. I: Die Genesis des
Kapitalismus, vol. II: Die Theorie der kttpitalistischen EntwiMung (Leipzig:
Duncker & Humblot, 1902). Vol. Ill appeared much later as Das Wirtschaftsle-
ben im Zeitalter des Hochfatpitalismus (.Munich: Duncker & Humblot, 1927).
For Talcott Parsons' interpretation of Sombart's relation to Marx, on the one
hand, and to Weber on the other, see his Structure of Social Action (Glencoe, HI. :
The Free Press, 1949), 495-499, and "Capitalism in Recent German Literature:
Sombart and Weber," Journal of Political Economy, vol. 36, 1928, 641-661, and
vol. 37, 1929, 31—51. Parsons, however, does not deal with the question of the
extent to which Weber's writings were a direct response to Sombart.

71. Sombart, op. cit., I, xii and xxix.

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Part Two: The Older Part

LXXIII

already far removed from Marxism, if he ever Was an orthodox Marxist.
At any rate, Weber did not consider the postulate feasible, but he was
interested in Sombart's facts and decided to approach them through
systematic comparative study. Since this involved a methodological dif-
ference, it was more than a mere sensible division of labor. 72 Sombart
contrasted the traditionalist orientation of craft production with the
spirit of capitalism, which to both men appeared very different from the
universal desire for wealth. This spirit was a peculiarly Luropean phe-
nomenon, but Sombart barely hinted at the comparative perspective:
"A glance at other major civilizations, such as the Chinese, Indian, or
ancient American, is enough to prove, in this regard too, the insufficiency
of the view that the genesis of modern capitalism can be explained from
a 'general law of development' of the human economy," 73 W! Jre Som-
bart merely glanced, Weber proceeded to the comparisons of Economy
and Society and, immediately afterwards, the studies of China, India
and ancient Judaism.

CHS. III-V: THE RELATIVELY UNIVERSAL GROUPS

At the beginning of ch. III Weber limits his use of the term "soc ; "ty"
to "the general kinds of human groups." He intends to deal with econ-
omy and society in this sense, not with economy and Kultur — literature,
art, science. The first groups to be treated are relatively universal — house-
hold, neighborhood, kin group, ethnic group, religious group, political
community — ; in other words, they are found at various levels of his-
torical development. The "developmental forms" of these groups are
taken up in the Sociology of Domination. The treatment of the more
basic forms is intentionally brief, in part because Weber is primarily
interested in the more differentiated associations and their relationship to
religion, law and politics, in part, presumably, because Marianne Weber
had dealt with some of the subject matter at length in her work on
■Wife and Mother in Legal Development (1907). Weber limits himself
to a series of points that either have polemical value or prepare the
later exposition. His critical targets are evolutionary conceptions, espe-
cially the theory of matriarchy and the related socialist theory of family,
property and the state (Engels and Bebel); the neighborhood senti-
mentalism of agrarian romantics; Gierke's notion of the kin group as the
first political association; and racist and nationalist ideas. Against the
Romanticist notions of those mourning the passing of Community, but
also against the apostles of Progress, Weber endeavors to show that

72. Cf. Parsons, "Capitalism . . . ," loc. cit., 31, 50.

73. Sombart, op. cit., I, 379.

L X X 1 V INTRODUCTION

"communal" and rationalist, capitalist and communist, traditionalist and
modernist elements appear in ever new combinations — in short, that
history is not the progression From Gemeinschaft to Gesellschaft.

Positively, Weber points out: The household is the original locus of
patriarchal rulership and the capitalist enterprise; the neighborhood is
an unsentimental economic brotherhood; the kin group is the protective
counter-force to the authoritarian household; ethnic groups are not
groups, strictly speaking, but propensities for, or residues of, group
formation. Weber particularly stresses the pluralism of group affiliation
in relatively undeveloped societies before the emerging political com-
munity gradually monopolizes the use of force — contrary to the view that
modern society is more pluralist than traditionalist society in this respect.

Weber sees no evidence for a universal stage of matriarchy, He
explains maternal groupings as a result of military separation of the
males from the household. This separation produces the men's house,
which nowadays appears in residual form in army barracks and student
dormitories — Weber likes to move back and forth, often with ironic
undertones, between the ancient origin of a phenomenon and its sur-
vival into modern times, The patriarchal household emerges with the
military dispersion of warriors in the countryside. In dealing with polyg-
amy and monogamy Weber provides a specifically economic, non-
romantic explanation. Monogamy suited the household of the emergent
urban patriciate; only later did Christianity raise it to an ethical level.
With the dowry the calculative spirit entered the domestic communism
of the family. This spirit reached a high point with the rise of the
capitalist family enterprise. The legal forms of early modem capitalism
originated in part in the communistic household, as Weber had already
shown in his dissertation. The enterprise was eventually separated from
the household, but Weber points to an historical twist: a "later" eco-
nomic stage, such as capitalism, may perpetuate or recreate an "earlier"
(communistic) family structure in which the extended family remains
a unit: "Beyond the balance sheet, those lucky enough to participate
enter the realm of equality and brotherhood" (below, 360) — a reference
to the communist slogan. Here Weber takes obvious pleasure in outdoing
the dialectic of historical materialism. His general point is that the
household and domestic authority are relatively independent of eco-
nomic conditions; in fact, they often shape economic relationships be-
cause of their historically developed structure. Weber believed that the
contractual regulation of household relations was a peculiarly Occidental
phenomenon. Only in Europe did the household create out of itself the
capitalist enterprise; elsewhere it developed into the oikos, the economic
basis of patrimonial domination.

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Part Two: The Older Part

LXXV

Households are related to one another through neighborliness in an
uhpathetic, economic sense. The neighbor is the typical helper in need.
Thus, neighborliness is not restricted to social equals, but customary
hejp rendered by social inferiors may gradually turn into manorial serv-
iced The neighborhood may become an economic group proper or an
SKtonomically regulatory group, but even in the self-sufficient economy
of early times there is no necessary identity between neighborhood and
other associations. Only in the case of joint political action can the
neighborhood develop into a local community.

The kin group is usually not an extension of the household but a
protective group guaranteeing the security and legal protection of the in-
dividual. Collective self-help is the most typical means for the defense
of its interests. The oldest trial procedures originate in compulsory ar-
bitration within, and between, kin groups. Insofar as kin groups do not
have a head with powers of command and a staff, they are not organiza-
tions in Weber's sense. Through their regulation of marriage and lineage
relations kin groups may effectively curb domestic authority. Similarly,
the property laws of the great empires steadily weaken unlimited patri-
archal power, but because of the very predominance of patriarchalism —
another dialectical feature of historical development. Kin groups may
oppose political associations and cross the boundaries of political com-
munities. They tend to become associations only when economic condi-
tions make it desirable to erect monopolies against outsiders.

Race and ethnicity are familiar devices for the monopolist protection
of interests. Weber doubts the sociological utility of both concepts if
understood in a naturalistic way. He insists that, regardless of the out-
come of genetic research, social behavior must be interpreted primarily
in social terms. Ethnic membership derives from some consciousness of
kind due to common customs, common language and common historical
experiences. It may be the product of political association and may re-
main after the group has dissolved politically. The cultural and political
importance of ethnicity rests on the fact that the sense of ethnic honor
is a specific honor of the masses and, in the extreme, leads to the notion
of the chosen people.

Weber's sketch of nationality and cultural prestige (ch. V:4) illum-
inates the political situation of Central Europe before the first World
War. The section is closely linked to the chapter on the political com-
munities (ch. IX). However, Weber had one more major universal
group to deal with: the religious Gemeinschaft. In theoretical com-
plexity, originality and sheer size the chapter on religious groups was
bound to transcend the preceding chapters.

L X X V I INTRODUCTION

CH. VI : THE SOCIOLOGY OF RELIGION

In 1902 Sombart touched on the impact of Calvinism and Quakerism
on capitalist development and noted that it was "too well-known a fact
to require detailed explanation."'* Weber, far from being deterred by this
dismissal, proceeded to state more fully the' case for the Protestant
ethic's impact on the spirit of capitalism." He may also have been
prompted by Schmoller, who in a masterful review of Sombart, his most
exasperating pupil, observed :

Whatever Marx and the Social Democrats have against the capitalist —
the "hunger for profit" and the un trammeled ruthlessness toward the
worker's welfare — concerns primarily the manner in which the indi-
vidualist drive for acquisition developed between 1500 and 1900 and cut
itself loose from most earlier moral and social restraints. These phenom-
ena must be investigated if one wants to understand today's economy.'*

If it is unclear whether Schmoller's suggestion really was a major
factor in Weber's decision to write the "Protestant Ethic and the Spirit
of Capitalism," it can be stated affirmatively that the relationship be-
tween Calvinism and capitalism had been an "intern^" academic issue
for some time and that Weber wrote in response to other studies, and

74. Sombart, op. cit., I, 381.

75. Weber seated the major differences between Sombart's approach and his
own in the 1910 re-issue of "Die J Protestantische Ethik una der Geist des
Kapitalismus," GAzRS, I (1920), 34; for other references to Sombart see ibid.,
5, 21, 33, 38 et passim; these include his replies to Sombart's later critiques.
Weber explained: "Although the essays go back, in all important respects, to
much earlier studies of mine, I need scarcely emphasize how much their presenta-
tion owes to the mere existence of Sombart's substantial works, with their pointed
formulations, even — and especially — where they diverge from them" (tfcia., 41).
In his last anti-critique Weber mentioned that he had presented some of his ideas
on the Protestant ethic in his courses at the University of Heidelberg in 1 897/98.
See "Antikritisches zum 'Geist' des Kapitalismus," AfS, XXX, 1910, 177.

76. Gustav Schmoller on Sombart in his ]ahrbuch fur Gesetzgebung, Ver-
■waltung und Volkswiftschaft, vol. 27, 1903, 298; cf. Lindenlaub, Richtwngs-
hampfc . . , , op. ctt., 287. It is true that Webet did not recognize Schmoller,
the most powerful figure in the Verem fiir Sozialpolitik, as one of his teachers
and openly disagreed with him in political matters, but this may have been mote
of an additional incentive than a hindrance to prove to him what could be done
in this regard. In fact, Schmoller later worked Weber's findings into his Grundrhs
der allgetneinen V olkswirtsckaftslehre (Leipzig: Duncker & Humblot, 1908).
Marianne Weber believed that Weber had started the first essay on the Protestant
ethic ". . . in 1903, probably in the second half, just after finishing the first part
of his treatise on Roscher and Knies" (Lebenshild, 340). Schmoller published
Weber's treatise on "Roscher and Knies and the Logical Problems of Historical
Economics" in his Jahrbuch in the fourth issue of the 1903 volume, having re-
viewed Sombart ir. the first issue.

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Part Two: The Older Part

LXXVII

not just against historical materialism as has sometimes been suggested
in spite of his own denial at the end of the work." Weber acknowledged
particularly the earlier work of three colleagues: Eberhard Gothein's
monumental study modestly en tided Economic History of the Black
Forest, Werner Wittich's "tremendously perceptive remarks" on religious
differences between France and Germany, and Georg JeJlinek's "proof
of religious traces in the genesis of the Rights of Man . . . which gave
me a crucial stimulus ... to investigate the impact of religion in areas
where one might not otherwise look." 7 ?

The publication or the two essa*ys on the Protestant ethic in the
Archtv fiir Sozialwissenschaft itv 1904/5 was an instantaneous literary
success and almost immediately led to the controversy that has since con-
tinued unabated. The exchange of antiques and anti-critiques between
Weber and his adversaries lasted mttil 1910.™ Weber considered the
exchanges "pretty unrewarding" and. decided on another positive state-
ment, which became the present chapter. He left the historical treatment
of Protestantism to his friend Brnifc Troeltsch, who was (hen working
on The Social Teachings of the Christian Churches and Sects, 80 and
instead put the theme m a compwative perspective. Yet neither the,
"underlying" issue of the rise of capitalism nor that of rationalization
and secularization over the ages determines the structure of the So-
ciology of Religion; it is built, rather, around the relation of religions to

77. For example, Parsons has written that "the essay was intended to be a
refutation of the Marxian thesis in a particular historical case." However, WebeA
general theoretical interest in the critique of historical materialism should not be
equated with his reasons for writing the essays at that time. Cf. Parsons,
"Capitalism . . . ," loc. cit., 40.

78. Cf. Eberhard Gothein, Wirtschaftsgesckichte des Schwarzwahtes (Strass-
burg; Triibner, 1892), 674; Werner Wittich, Deutsche und franzQsische Kultur
im Elsass (Strassburg: Schlesier & Schweikhardt, 1900), 18-31 (the quote is from
GAzHS, 1, 2 Si cf. below, 396); Georg Jellinek, Die Erklarvng der Me*schen~ und
Bitrgerrechte (Leipzig: Duncker & Humblot, 1895; and ed., 1904), passim (cf.
below, 1209) — the quote is from Weber's memorial address on Jellinek (Rene
Konig and Johannes Winckelmann, eds„ Max Weber turn Gedachtnis [Koln:
Westdeutscher Verlag, 1963], 15). — On the general familiarity of the 18th and
19th-century literature with the relationship between religious distant and eco-
nomic motivation, Protestantism and capitalism, see Reinhard Bendix, "The
Protestant Ethic — Revisited," in Comparative Studies in Society and History,
IX:3, 1967, 266-273.

79. For an account, see Ephraim Fischoff, "The Protestant Ethic and the
Spirit of Capitalism; The History of a Controversy." Social Research, XI, 1944.

51-77.

80. Em st Troeltsch, Die Soziallehren der christlichen Kircfeew und Gruff en
(Tubingen-. Mohr, 1912), in part published earlier in the form of articles in
AfS, 1908-10; trsl. by O. Wyon (London: Allen & Unwin, 1931).

L X X V I 1 1 INTRODUCTION

thptr organizational carrieis (functionaries), to the status groups and
classes supporting them, and to their inherent theological elaboration.
Wdber took the general functions of religion, whether in a Durkheimian
or a Marxist sense, for granted. With his customary realism, he stressed
the compensatory functions of religion and, even more, the political uses
r of religion for legitimation and pacification. In a limited way, it is pos-
sible to see his sociology of religion as a vast paraphrase of Marx's
dictum that "religion is the sigh of a creature in distress, the heart of a
heartless world, the spirit of times without spirit. It is the opiate of the
people." 81 But there is an important difference: Weber had a much more
profound sense than Marx for the meaning of ethical conduct. The
religiotrs polemics oPEngels, August Bebel and Karl Kautsky appeared
to him as shallow rationalism. Possibly, Weber was familiar with Engels'
fleeting remarks on Calvinism: "Where Luther failed, Calvin triumphed.
His dogma was adapted to the most daring of the bourgeois. His doctrine
of predestination was the religious expression of the fact that in the
commercial world of competition success or bankruptcy depend not on
the enterprise or skill of the individual but on circumstances independent
of him.""* At any rate, the "Protestant Ethic and the Spirit of Capitalism"
reversed this materialist interpretation without substituting a mere
spiritualist one. Behind the divergent perspectives of Weber and the
Marxists was a personal difference: The Marxists were psychologically
unable to take religion seriously enough to undertake his kind of study.
Weber called himself "unmusical" in matters religious — this gave him
the necessary analytical distance — , but he lived in an extended family in
which the women were devout and articulate believers. With his strong
family sense, Weber could have disdained religion only at the price of
offending those closest to him — this gave him the requisite empathy for
the study of religion.**

For systematic reasons, ch, VI begins with a brief treatment of
primitive religion and the original this-worldly orientation of magical
and religious action (sees, *-»)-** Weber quickly sketches the rise of
functional, local and, finally, universalis! and monotheist conceptions of
deity. As in the preceding chapters, his ethnographic examples are occa-
sionally doubtful or erroneous, or a statement may suffer from the
telescoping of historical events over millennia, or the love of paradox

81. Karl Marx, "Zur Kririk der Hegelschen Rechtsphilosophie," in Die
Friihschriften (Stuttgart; Kroner, 1953), 208.

82. Friedrich Engels, English introduction to Socwf-'w* Utopian and Scientific
(London 1892), published in German in Neue Ze.it, XI: 1-2, 1892/93; Marx/
Engels, Werke (Berlin: Dietz, 1963), vol. 22, 300.

83. Cf. Marianne Weber, LebentbiU, 27, 84, 88, 9if, 35 if.

84. For an explanation of Weber's intention, see below, 421, n. 1.

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Part Two: The Older Pan

LXXIX

carries him to an extreme. When he comes to the rationalization of con-
duct through ethical and exemplary prophecy (sees, nt-jv), Weber
strikes out on his own. Budding on Hamack's typology, he isolates the
features peculiar to the prophet through a comparison with magicians,
lawgivers, teachers of ethics and mystagogues. Prophets and priests
organize the permanent association of laymen: the congregation. Proph-
ets develop preaching and pastoral care, priests the dogmata and the
canonical writings.

After thus dealing with the religious leaders and the associations
created by them Weber rums to an examination of all major-social strata
and their affinity to religion (sees. v-vi). This provides a comparative
frame for assessing the Puritan bourgeoisie, but in the context of the
present work it also prepares the treatment of aristocratic and bureau-
cratic rulership, the role of the intelligentsia, and the themes of bureauc-
ratization and democratization. Aristocrats tend toward irreligion, unless
they are warriors for the faith, an historically important, but transitional
, phenomenon. Bureaucrats are inclined toward a formalistic religion or
philosophy, while permitting less complex magical beliefs among the
masses for the sake of "mass domestication." The urban bourgeois, even
though concerned with economic rationality, tends to be more religious
than the aristocrat and bureaucrat. In fact, the rationalist piety of
bourgeois believers is a step on the road that ultimately led to the
Protestant ethic. Non-privileged strata have powerful needs for salva-
tion, but they may find primarily passive or purely affective expression.
Weber goes down the social ladder from the craftsmen's piety, so im-
portant in early Christianity, to the religious disinclinations of slaves,
day laborers and the modem proletariat. Peasants are traditionally con-
cerned not with salvation but with the practical, magical effects of re-
ligion, even though in modem times the rural population is a mainstay
of Christian conservatism. Salvation religions, usually the creation of
intellectuals of higher social rank, can devolve into the creed of non-
privileged strata, changing their function from legitimation to compen-
sation. Pariah peoples tend to develop an intense religious attachment
— Judaism being the historically decisive case.

After this tour de force in the sociology of knowledge Weber balances
his analysis of status tendencies with an investigation of religious in-
tellectualjsm (sees. vii-xi'). Intellectuals of diverse status elaborate re-
ligions on logical and theological grounds. Status differences may recede
in the face of changing political fortunes; an important case is the
escapism of intellectuals of politically declining strata or defeated com-
munities. Conversely, nativist lower-class intellectuals may turn against
the intellectualism of higher strata, as it happened in Judaism and early

L X X X INTRODUCTION

Christianity vis-a-vis Hellenized intellectuals. Weber carries his analysis
up to his own time, ending with secular salvation ideologies and some
biting remarks on cafe-house intellectuals (sec. v«;8).

The last part (sees, xii—xv^ examines the influence of religious ethics
on the "world": the sphere of the economic, political, artistic, and sexual.
The last extant section breaks off with yet another attempt to contrast
Jewish rationalism, Puritan asceticism, Islamic this-workliiness. Buddhist
other-worldliness and Jesus' indifference to the world — all with a look
back toward "The Protestant Ethic," but also in anticipation of tlu: sub-
sequent large-scale studies of the great world religions, to which Weber
turned without completing Part Two of Economy and Society.

CM. VII. THE MARKET: ITS IMPERSONALITY AND ETHIC

The chapter on the market — another group (Gemeinsckafi) in
Weber's terminology — logically follows the treatment of religion. The
economically rationalized, hence ethically irrational, character of pure
market relationships is basically irreconcilable with ethical religion —
with the historic exception of Calvinism. Whereas Weber gave much
attention to the chapter on religion, his market chapter is only a brief
sketch. Unlike the sociology of religion, the market was a topic tf ;
could be handled by many other men. Perhaps Weber postponed writing
the chapter because he waited for other contributions to the series, the
better to coordinate the various expositions. In any case, the fragment he
did write was sufficient to distinguish the market (Marktgemeinschaft
or Marktvergemeinschaftung) from the more "natural" groups and the
political community. The market is the Gemeintchaft based on the most
rational kind of social action: association (Vergesellschaftung) through
exchange. The association may last only for the duration of the exchange,
or it may develop into a continuous relationship.

In early history the market was the only peaceful relationship of
men who were not linked through household, kinship or tribal ties. The
participants were strangers, "enemies" who did not expect action in ac-
cordance with an ethic of brotherhood. The "community" of the mark' i
is the most impersonal group, but not because it involves struggle
(Kampf) between opposed interests — there is struggle also in the most
intimate relationships; rather, the market is the more impersonal, the
more the struggle of the participants is oriented merely to actual or
potential exchanges. In this manner the market is the exact opposite of
any association (VeTgesellschaftung) based on a formal order, volun-
tary or imposed. Even so, neither the use of money nor the irpp-isoiialiLy
of exchange prevent the eventual rise of a market ethic binding on those

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Part Two: The Older Part

LXXXI

who continually trade- Such exchange partners develop expectations of
reciprocity which make rhiirn abide by the rules. Occasional traders are
most likely to ignore the maxim that "honesty is the best policy"; Weber
sarcastically cites aristocratic cavalry officers trading horses — a familiar
current example is the private sale of automobiles. One aspect of the
market ethic is die fixed price, a peculiarly European phenomenon that
became one of the preconditions of modern capitalism.

The market proved destructive to many status monopolies of the past.
Yet the very success of capitalist interests on the free market led to new
monopolies based either on political alliances or sheer superiority over
competitors. As markets increased in importance, religious and political
associations moved to protect them for reasons of their own. This brings
Weber to the organizations concerned with legal regulation.

CH. VIII, THE SOCIOLOGY OF LAW

The Sociology of Law gives historical depth to the introductory state-
ment on convention and law (ch. I). 85 After the earlier methodological
critique of Stammler's approach W 7 eber now demonstrates what a so-
ciology of law should be, in contrast 1 to legal philosophy, jurisprudence,
and mere legal history. The chapter provides a typological setting within
which a given legal phenomenon can be located, not with regard to any
systematically or dogmatically proper placement but for the sake of his-
torical explanation. The impact of Roman law and common law on the
rise or capitalism constitutes one link with the overall theme of Economy
and Society; another is the varieties of rationalization, which may be
mutually incompatible. The chapter is also constructed with a view to
the frequently mentioned Sociology of Domination: Here Weber treats
the creation and administration of law by political and other associations,

8;. Chs. I and VIII are die only sections of Wirtschaft und Gesellschaft that
could be compared with the original manuscript. Marianne Weber put these
.chapters in an envelope marked "Sociology of Law" — ch- VIII had no manuscript
title — and presented them as a gift to Karl Loewenstein, whom they accompanied
into exile, thus escaping the fate of the rest of the manuscript. On the basis of
this original, now at the Max Weber Institute in Munich, Johannes Winckel-
mann prepared a definitive edition — although Weber's almost ille^Me hand-
writing leaves some passages doubtful — of the two chapters; see Recntssoziologie
(2nd ed.; Neuwied: Luchterhand, 1967). The text now differs considerably from
that in the igz$ edition of Wirtschaft und Gesellschaft, on which the Rheinstein-
Shi Is translation of the Sociology of Law was based. The changes involve not
merely many printing errors, but also the sequence of sections and terminological
clarifications, For example, the category of the "coercive contract" (Zwangsion-
trakO turned out to be a misreading of Zweckkontrakt, which (in sec- tO con-
trasts with Statu&kontrakt, a distinction related to Henry Sumner Maine's A&K&ent
Law (i860-

L X X X 1 1 INTRODUCTION

there the ruler's legitimation, organizational power and motives for im-
posing law.

If Weber was a self-made scholar in affairs religious, he was on
academic homeground in the Sociology of Law. Not only do legal topics
of his dissertation and Habilitation of two decades before appear, but so
does much of the later literature. Even as Weber broadened his intellec-
tual concerns, he retained an active interest in legal studies. His ability
to write the Sociology of Law as a legal historian makes this the most
difficult chapter for the legal layman and mere sociologist, for whom it
may be helpful to perceive the broad structural parallels with the So-
ciology of Religion." 1 The substitution of legal for religious topics yields
the following rough oudine: the basic categories of public and private
law; the development of contracts and of juristic personality; early forms
of law administered by non-political associations; an occupational typol-
ogy ,of "specialists," ranging from charismatic law prophets to legal
honoratiores and university-trained judges; a typology of various forms of
legal training; the historical systems of theocratic and secular law; a
comparison of Indian, Islamic, Persian, Jewish, Canon and Roman law,
the great codifications; the revolutionary power of natural law; formal
and 'substantive rationalization and the ineradicable tension between
formal and substantive justice; finally, the irrationalist trends at the eve
of the first World War, with their "characteristic reaction" to formal ra-
tionality and the dominance of legal experts — paralleling the fashion of
surrogate religions in intellectual circles and the "romantic game of
-syndicalism." Here Weber continues the sociology of intellectuals with
an examination of their propensity for substantive justice, on the one
hand, and skepticism on the other; he points to another historical
dialectic: 19th-century socialist intellectuals first advanced substantive
natural law against the formalist natural law of the bourgeoisie and then
undermined their own position through positivistic relativism and
Marxi: . evolu inism. ,/r

The gradual ascendancy of stateHaw over the law of the other groups
is part of the larger theme of the rise of the political community. Weber
follows juridical usage when he makes the existence of a legal order
dependent on a stiff ready to resort to physical or psychic coercion, and
when he defines ifce modern political community — the state — in terms
of its monopoly on the legal use of force. As a sociologist, however, he is

86. fat fettAtpKtfttkns of the Sociology of Law by jurists, see the introduc-
tion* by R it e uat a Ut (M«* W*b*r on Law in Economy and Soctrty, 1954, xxv-
bori) sad Wmckrlnwim (Ruhtssozichpe, 1967, 15-49); "i» Kan" Engisch,

"Max Weber sb Rechtsphflowph und alt Rcchtswziologe," in K. Engirt, B.
Pfister xai J WhffM"'""! eds., Max W«ben G*d4cktni$tchrift d*r Ludvrig-
Mttfettilums-Untwrsfeft Mtinchen (Berlin: Duncker & Hurablot, 1966), 67-88.

io:I ]

Part Two: The Older Part

LXXXIII

equally concerned with the extent to which this claim is de facto limited
in the modem state, where conventional and religious sanctions continue
to be powerful. Weber remembered as one of his youthful lessons the
inability of the mighty Prussian state to triumph over the Catholic
church in the Rulturkampf of the eighteen-seventies and again over the
Social Democrats in the eighties, the period of the anti-socialist laws.

The chapter on political communities links the chapters on the more
"universal" groups and the Sociology of Law with the Sociology of
Domination; it describes the development of political community from
rudimentary beginnings to complex differentiation. 87 For many centuries
the political community differed only quantitatively from the other
relatively "universal" groups that gradually lost their protective and
coercive functions as the old political pluralism declined. Eventually a
qualitative difference developed: a belief in the right of the state to
define the legal order and the use of legitimate force. This belief in
legitimacy resulted from gradual usurpation. Previously, the notion of
legitimate force was part of the consensual action of kin members en-
gaging in blood revenge; now it became part of the organized action
(yerbandshandeln) of community members. In the modern state, the
exercise of political powers (Gewalt) is a part of institutional action.
(anstaltsmaessiges Handeln).**

87. Until the fourth (1956) edition of Wirtschaft und- GaiUschaft, the
Cemeinschaften ranging from the household to die religious and legal associations
and even the city were arranged into a separate part (Part Two, "Typen der
Vergemeinschaftung und Vergesellscnaftung*) set off against the types or domina-
tion (Part Three, Typen der Hemchaft ) which included the political com-
munity. There is no warrant for this division in Weber's 1914 outline or in the
logic of his exposition. The categories of social action and group formation
(Vergemeinschaftung, VergeseUsehaftung, Hemckafi) encompass all of (be pres-
ent Part Two, although the detailed treatment of Hemchaft b reserved for the
last chapters. The definition of Hcmckmft appears first, together with the other
basic concepts, in The Categories of Interpretive Sociology" (App. I, 1378
below) and in the first chapter of Part One.

88. In English, the' use of "political power" for folimche Gewalt can easily
be misleading. Therefore the plural "powers" or the singular "authority" has been
used. linguistic habit and styustk convenience make it difficult to render Weber's
social action terms always in such ways as to avoid the impression that it is
groups, rather than individuals, which act. "Organized action" is organization'
oriented action and "institutional action" mstittition-orienud action; likewise,
"class action" (below, 929) is class-oriented action and "party action" (below,
936) party-oriented action— four varieties of social action that contrast with "mass
action. " 'lite juxtaposition of social and mass action was obscured in the Gerth and
Mills translation of ch. DC: 6, which interpolated the terminology of Part One
(ch. 1:9) into the text of Part Two (cf. Gerth and Mills, From Max
Wmher . . . , 183). In the different terminology of Part Two, Gemeinschaftskan-
deht means "social action," not "communal action," and VergeseUtchaftung means

L X X X I V INTRODUCTION

CH. IX. POLITICAL COMMUNITY AND STATE

The political community is a group ready to defend a given territory
with force against outsiders. This minimum definition is designed to en-
compass all historical communities and thus does not even include the
guarantee of internal security. Many communities actually did limit
themselves to nothing more than the maintenance of territorial control.
The Pennsylvanian commonwealth of the Quakers was exceptional in
that it refused for a time to use external force. Between these two ex-
tremes social action may be oriented to any number of goals, and there-
fort a community may be robber state, welfare state, constitutional state
or Kulturstaat. Communities united- merely for defense may in peacetime
relapse into a state of anarchy (in the strict sense) — the mere consensual
recognition among the members of the given economic order. And ex-
ternal peacetime may also be a period of interna] war. Thus the
ascendancy of the political community over other groups becomes the
history of internal pacification: of the peace edicts of kings, bishops
and cities during their struggles with the feuding nobility. Old and new
groups whose ideal and material interests were not adequately protected
by the traditional arrangements demanded pacification and the "nation-
alization" of legal norms (treated in the Sociology of Law).

Weber clearly distinguishes between patriarchal powers, "non-
authoritarian" consensual and arbitral powers, and political powers
proper — autonomous military and judicial authority. The prototype for
political powers is the invperium of the legitimate Roman officials (ch.
VIII :vi), which later was usurped by' military leaders who received
ex post facto confirmation by the Senate. Political authority (Gewc&i)
involves the power over life and death which gives the political com-
munity its specific pathos. As the community develops, political coercion
frequently becomes internal, since many demands of the political order
are accepted by the members only under pressure. However, a political
community is held together not only through coercion but also through
common historical experiences: it is a "community of shared memory"
QErinnerungsgemeinschafO. Yet both the pathos of the supreme sacrifice
and the shared memory of dangers persist also in other groups ranging
from those practicing violence — the Camorra, nowadays the Mafia —
to those suffering it, as in persecuted sects.

After an historical sketch of the development of political community

"association," not "societal action" — i.e., it is not a contrast in Toennies' sense
(cf. below, 60, n. 24). Herfce, terminological adjustments had to be made. For
example, the seemingly illogical passage. "The communal actions of parties always
mean a societal ization ' (Gerth and Mills, op. cit., 194) now reads "party-oriented
social action always involves association" (below, 938).

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Part Two: The Older Part

LXXXV

(sec. 2) Weber again takes up the European state of affairs on the eve
of the first World War (cf. ch. V:4), comparing it with the capitalism
and imperialism of Antiquity. The dynamics of international and na-
tional stratification is his dual theme: the relations of prestige arid power
among and within political communities. Here again was an issue pre-
viously raised by Sombart. His Socialism and Social Movement in the
10th Century (1896) opened with the dictum of the Communist Mani-
festo that "the history of all hitherto existing society has been a history of
class struggles." Sombart considered this

one of the greatest truths of the century , . . , but not the whole truth.
For it is incorrect to say that all history of society is merely a history
of class struggles. If it be worthwhile at all to subsume world history
under one formula, we will have to say that social history has moved
between two poles . . . which I will call the social and [inter-] national
antagonisms COegensatze). . , . We find the same striving for wealth,
power and prestige among communities as among individuals. . . . Today
we are at the end of an historical epoch of national exaltation and in
the midst of a period of great social cleavage; it seems to me that all the
' antagonistic viewpoints of the various groups can be reduced to the
alternative: national or social. 8 *

Sombart did not further pursue the topic of international stratifica-
tion and instead focussed on the Marxist concept of class. Weber, how-
ever, carried the juxtaposition of the external and internal realm of
honor to its logical conclusion and elaborated a scheme that also in-
corporated the Marxist approach as one segment In the external sphere,
he was concerned with power prestige, not just with national pride,
which can also be found in non-expansionist Switzerland or Norway.
Since power prestige derives from power over other political communi-
ties, it promotes expansionism and is thus a major component cause of
war. The prestige pretensions of one country escalate those of others —
Weber points to the deteriorating relations between France and Germany
m the first decade of the century when, in contrast to the eighteen-
nineties that Sombart had in mind, nationalist antagonisms prevailed
again over internal cleavage. The carriers of. power prsstige are the
"Great Powers," yet their ruling groups, fearing the seizure of power by
their own victorious generals, are not always expansionist — witness
ancient Rome and early 19th-century England. In both cases, however,
capitalist interests enforced the resumption of political expansion.

Weber's theory of imperialism adds the economic element to the
prestige factor. Building on his earlier writings, Weber constructs his

89. Werner Sombart, Socialisms uttd sociaU Bewegung im 19. Jahrhundert
(Jena: Fischer, 1896), if.

L X X X V I INTRODUCTION

notion of imperialist capitalism from the first great historical case:
ancient Rome with its tax-fanners and state purveyors. In modern
times, as in Antiquity, it is the general structure of the economy, rather
than trade interests, which is crucial for political expansionism. Im-
perialist capitalism may be restrained by the profitableness of "pacifist"
capitalism, but for his own time Weber foresees the former's ascendancy,
largely because of the state's role as the biggest customer of the defense
contractors and similar enterprises. The economic-pacifist interests of the
petty-bourgeois and proletarian strata are easily reduced by appeals to
the emotive idea of "the nation."

Weber reviews the diverse cultural and social characteristics of
individuals that may define membership in a nation. He emphasizes
three elements: (i) the speed with which certain historical experiences
can create the sense of nationhood, (2) the different meanings of the
term from one country, and one stratum, to another, (3) the intellec-
tuals' role in fashioning a sense of national identity. His unfinished
analysis of the intellectuals — "those who usurp leadership in a Kuhur-
gemeinschaft" — breaks off with a hint at the affinity of cultural prestige
and power prestige, but not without the skeptical reminder that "art and
literature of a specifically German character did not develop in the po-
litical center of Germany" (below, 926).

Weber's improvement on the Marxian cbss analysis lies in the
detailed typology of the three phenomena of power distribution within
the political community: class, status group, and party. Those powerful
in the economic order need have neither political power nor social honor,
but they often do have both. Apart from the economic order, the dis-
tribution of political power is codetermined by the legal order and the
social or status order. Weber proposes to consider classes not as com-
munities but as propensities for social action, similar to ethnic groups.
Therefore, he speaks of "class situation," -which is defined by market
situation and has two basic categories: property and the lack of property.
Property, in turn, differs according to whether it is used for rent income
or profit-making. Although it does make a difference whether communi-
ties are based on labor, as in soil-tilling villages, or merely on property,
as among cattle-breeders, the historical origin of class struggles lies not
in the countryside but within the city: in the clash between creditors
and debtors. At 'a later economic stage the class struggle was trans-
formed into the struggle on the commodity market; in modem times
it has come to center in wage disputes on the labor market. The con-
temporary bitterness of wage-earners is primarily directed against the
en tr eprene u rs and managers, who are more visible than die "real"
capitalists, the shareholders and bankers. This opaqueness is only one of

io:I]

Part Two: The Older Part

LXXXVII

the many social and cultural factors that influence the way in which class
situation may 0>r may not) become the basis for class-oriented or party-
oriented action.

The major polemical target of this exposition on class and class
situation was "that kind of pseudo-scientific operation with the concepts
of class and class interests which is so frequent these days and which has
found its most classic expression in the assertion (Behauptung) of a
talented author that the individual may be in error about his interests,
but that the class is infallible" (below, 930) — a reference, it seems, to
none other than the young Georg Lukdcs. 60 As against this class reifica-
tion by a new breed of Marxian metaphysicians Weber insisted on his
own empirical dialectic of class and status. Status groups are real, if often
amorphous, groups limiting the sheer market principle with its opposi-
tion of class interests. Positive or negative social honor is the basis of
status groups. Status differences express themselves in the style of life: a
phenomenon extensively treated in the Sociology of Domination. In the
extreme, status differentiation leads to caste formation: a link with the
earlier exposition of ethnic and religious groups. Status groups are the
bearers of all conventions: a structural explanation for .the coercive
character of conventions that Weber upheld against Stammler. In sum,
classes are part of the economic order, status groups, of the social order,
put in another way, classes are rooted in the sphere of production and
acquisition, status groups in the realm of consumption.

Class interests as well as status interests may be represented by
parties. In contrast to classes and status groups, parries are always
purpose-rational associations, since their goal is the acquisition of power
in larger associations. Thus parries' are f requendy authoritarian organiza-
tions — an issue of paramount concern for the sociology of political parties
in modern democracy. However, adequately to understand the structure

90. When Weber wrote this postage, Georg Lukacs was one of his dose
young friends. He had attracted public attention through hit tint German book,
Die Srele und die Vomen (1911J. At die time he was preparing himself for an
academic career, a plan destroyed by die onset of the war. In Weber's Heidelberg
circle Lukacs and Ernst Bloch r ep r esen ted a new generation of Marxian* who
were highly critical of "vulgar" Marxism. If the identification is correct, Weber
refers to conversations rather than pubncations, as he also does elsewhere in the
text. An early formulation of Lukacs' theory that the proletariat as a whole is
infallible about its interests is found in an Hungarian essay of 191 9, Tactics
and Ethics"; see his Schriften ar Utafegfe wd P<mk, ed Peter Ludz
(Neuwied; Luchterhand, 1967), esp. 9, i8f.,^iTfcak*cs lam adapted Weber's
dass terminology in his famous work on History and Clou Consdomnex (1923),
On the relation of Weber and Lukacs, see Marianne Weber, LehentbUd, 473-76.
and Paul Honigtbeun, "Ermnenmgen an Max Weber, 1 ' in R. Konig and J.
Winckelmann, eds., Max Weber mm Gedacktnis, 1 84-88.

LXXXVIII INTRODUCTION

of parties one must first examine the larger associations within which
they operate.

Herewith Weher has reached the Sociology of Domination. Parties
vary not only according to class and status structure but also according
to the larger group's structure of domination. In line with his compara-
tive interests in earlier studies, Weber now proceeds to a broad typology
comprising parties and polities of Antiquity as well as of the Middle
Ages and of some non-European areas.

CHS. X-XVI. TH2 SOCIOLOGY OF DOMINATION

The Sociology of Domination is the core of Economy and Society.* 1
The major purpose of the work was the construction of a typology of
associations, with most prominence given to the types of domination and
their relation to want-satisfaction through appropriation. To be sure,
religion and law were constituent parts of the work, irrespective of
whether Weber planned the chapters to be as comprehensive as they
finally came to be, but the 1914 outline and the proportions of the manu-
script show the Sociology of Domination to be the central theme. In the
reception of the piecemeal translation of Economy and Society, the
Sociology of Domination has been obscured as a whole. Until now,
nearly half of it was untranslated; the other half was divided among
three different translations. 82 In the theoretical discussions the three
types of legitimate domination have usually been treated in isolation, and
in research the complex typology of domination has all too frequently
been reduced to the simple dichotomy of charisma and bureaucracy, if 1
not just to the so-called Weberian "formal model of bureaucracy." Too

91. Weber was in the habit of speaking, respectively, of his Sociology of Law,
Religion, Domination, and State, and he employed these terms in cross-references.
However, since the 1914 outline does not contain the terms and the manuscript
of ch. VIII was untitled, it appears likely that he did not want to use the phrase
"sociology of" in a chapter title. At any rate, in view of the great overall length
of chs. X-XVI, no summary tide was chosen in the text for the Sociology of
Domination. Even in its incomplete state this section is twice as long as the chapters
on religion and law — a quantitative indicator of their importance for the work as
a whole.

92. If ch. HI of Part One is included, there are four different translations.
The incomplete terminological summary of Part One further telescopes the his-
torical dimension. It does not parallel the structure of the Sociology of Domina-
tion in Part Two, especially in the chapters on secular and hierocraric rulership
and the city; the contrast of secular and hierocraric domination appears in Part
One in ch. 1: 17, and the forms of legitimate rulership peculiar to the city are
found mostly under rule by notables (ch. Ill: 15— 20). Moreover, feudalism is in
Part Two a variant of patrimonialism, in Part One a variant of charisma —
equally feasible classifications.

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Part Two: The Older Part

LXXXIX

often a rulership iias been measured only against the formal features of
bureaucracy or of charismatic domination. In this manner the technical
sense of the typology (see below, 263) has been disregarded: More than
one type should be compared to any given case, rather than just one
"ideal type" with one "natural system."

The Sociology of Domination is the mold in which some of Weber's
most substantive interests, and the influences arousing them, were fused
into a conceptual unity. As a basic influence Weber acknowledged the
work of his friend Georg Jellinek: "From his great studies I received
decisive impulses for whatever fate has permitted me to accomplish. , . .
[Among these was] his coinage of the concept of the 'social theory of the
state,' clarifying the blurred tasks of sociology." B3 In his Allgemeine
Staatslehre Jellinek defined' as the ultimate objective elements of the
state the social relations of men, as against metaphysical notions of its
corporeality:

More precisely, the state exists in relations of will among a plurality of
, persons. Men who command and others who obey Form the basis of the
state. ... In the state the relations of will, concentrated in an organiza-
tional unit, are essentially relations of domination. The quality of dom-
ination does not exhaust the essence of the state. But relations of
domination are so necessary to the state that it cannot be conceived
without them. The state has the powers of rulership (HerrschergewaW).
To rule (kerrschen') means the ability to impose ones own will upon
Others unconditionally. . . . Only the state has this power to enforce its
will unconditionally against other wills. It is the only organization that
rules by virtue of its inherently autonomous powers. . . . The state, then,
is that organizational unit equipped with underived powers of com-

Weber differentiated Jellinek's notion of rule. What Jellinek called
Herrschen, he called "power" QMacht); this left the term Herrschaft
(domination) free for an adaptation of the Kantian categorical impera-
tive: "The situation in which the manifested will (command) of the
ruler or rulers is meant to influence the conduct of one or more others
(the ruled) and actually does influence it in such a way that their
conduct, to a socially relevant degree, occurs as if the ruled had made
the content of the command the maxim of their conduct for its very
own sake" (below, 946)'. Domination transforms amorphous and in-
termittent social action into persistent association. Weber exemplifies the
difference of domination from mere power with the case of monopolistic
control in the market. In their own rational interest, the unorganized

93. R. Konig and J. Winckelmann, eds., Max Weber zwm Gedachtnis, 15.

94. Georg Jellinek, Allgemeine Staatslehre, 2nd ed. (Berlin: Haring, 1905;
isted., 1900), 169, 172.

X C INTRODUCTION

customers of a monopolistic enterprise may comply with its market
dictate; this is domination by virtue of interest constellation. Through
many gradual transitions, this relationship may he transformed into
domination proper, that means, by virtue of the authoritarian power of
command, as it prevails in the large-scale industrial enterprise and on
the manor — the two most important economic structures of domination.
Domination exists insofar as there is obedience to a command; in general,
obedience is due to a mixture of habit, expediency and belief in legit-
imacy. The subjects' willingness to comply with a command is enhanced
by the existence of a staff, which again acts on the basis of habit,
legitimacy and self-interest. Sociologically, then, a Herrsckaft is a struc-'
ture of superordination and subordination sustained by a variety of
motives and means of enforcement.*" For the historical persistence of
structures of domination, staff enforcement on whatever grounds is no
less important than belief in legitimacy. In fact, explains Weber, he is
"primarily interested in domination insofar as it is administration"
(below, 948). Only after defining domination in term* of rule by a
master and his apparatus does Weber add the ultimate grounds for its
validity. He turns to legitimacy because of its inherent historical im-
portance^ — the need of those who have power, wealth and honor to
justify their good fortune.

The resulting typology of domination goes far beyond the three
familiar types of authority. The substance of the Sociology of Domina-
tion consists in the general historical models of rulership. Weber does
not wish to work out a "political system" applicable to all political groups
irrespective of time and place; rather, he aims at a "systems analysis" of
these models. Here he takes up the postulate of a "social theory of the
state," but whereas Jellinek's typology of states remains largely on the
level of constitutional theory and political philosophy, Weber "descends"
to a level of greater historical descriptiveness. With the nature of the
modern state and of industrial capitalism as undedying themes, Weber
puts together a comparative scheme within which he integrates the
major topics and results of his earlier studies:

I. the ancient and medieval city state as an autonomous polity, rang-
ing from the patrimonial-bureaucratic kingdom to the confraternity of
equals (cf. above, sees. 6 and 7);

II. manorial domination (Grundherrschaft^ in Germanic Antiquity
and the Middle Ages, involving the issues of patriarchalism, feudalism,
and military communism (cf. above, sec. 4);

95. For the terminological resolution of the translation of Herrsckaft as
domination 01 authority, see helow, 61, n. 31. _

io:l] PariTwo; The Older Part XCI

in. the" rise of modern public and private bureaucracy and the or-
ganizational realities of modem democracy (cf. above, sec. 8);

iv. the perennial tension between usurpation and legitimation (cf.
above, sec' 7, p. li).

In the Sociology of Domination, theme I is treated mostly under
patrimonialism (ch. XII) and the city (ch. XVI >, theme II under
feudalism (ch. XIII) and charismatic rulership (ch. XIV); theme III
under bureaucracy (ch. XI) and again under charisma (ch. XIV);
theme IV under caesaropapism and hierocracy (ch. XV) and under the
special aspect of non-legitimate domination (again ch. XVI). However,
Weber puts at the beginning of the Sociology of Domination (ch. X)
what was politically most important to him: the meaning of democracy
in an industrialized and bureaucratized society.

(a) the theory of modern democracy. Since domination and
administration are interdependent, domination is an irreducible com-
ponent of democratic administration. So-called direct democracy is noth-
ing primeval, but a product of historical development. Its aim is the
minimization of domination; its precondition is the relative equality of
the participants. Here is another historical twist: Direct democracy is
most feasible in an aristocracy, whether it be Venetian noblemen or
the vaunted German "aristocracy of the spirit" — the university profes-
sors. Direct democracy, however, is inherently unstable, and wherever
there is economic differentiation in the group, domination tends to fall
into the hands of those who have the economic requisites for performing
administrative and political tasks. This is, first of all, a matter of "eco-
nomic availability," not necessarily of high status; thus, managers of
large-scale enterprises, teachers and medical doctors are less available
than lawyers, country squires and urban rentiers. In general, the avail-
able groups also have social honor, and then they are honoratiores
(notables). If direct democracy turns into rule by honoratiores, the de-
mand for democracy easily becomes the battle cry of those lacking in
wealth or honor. In that case both sides msy form parties, which tend to
be tightly organized because their object is, after all, the struggle for
power. If this happens, and if the community grows beyond a certain
size, "the meaning of democracy changes so radically that it no longer
makes sense for the sociologist to ascribe to the term the same meaning
as in the case discussed so far" (below, 951). f

Weber's own theory of modem democracy was directed against the
many intellectuals ("literati") to his right and left who failed to under-
stand the facts of parliamentary government and democratic party or-
ganization and were thus unable to weigh them against the prevalent

X C I I INTRODUCTION

monarchic constitutionalism or against panaceas such as the "corporate"
state, just as they failed to comprehend the technics imperatives of a
private capitalist economy in contrast to state socialism and capitalism.
Weber stressed the Formal similarity of the democratic party and the
capitalist enterprise: If parties are legal and party affiliation is voluntary,
the business of politics is the pursuit of ideal and material interests,
which is as 1 inevitable as the activism of the few against the passivity of
the many. Under the conditions of mass suffrage, the leadcrship.of the
few rests on mass mobilization, and this in turn requires an effective
party apparatus. The party bureaucracies parallel those of state and
economy. However, the bureaucratization of the parties does not neces-
sarily spell the end of meaningful political democratization or of charis-
matic leadership. Here Weber's disagreements with Robert Michels
reappear. ** Michels' "iron law of oligarchy" became for a time very in-
fluential in the American literature on democracy and party organization,
but eventually Weber's conception gained ground through its populariza-
tion in Joseph Schumpeter's Capitalism, Socialism and Democracy.* 7

The chapter on bureaucracy (ch. XI) elaborates the partly supportive
and partly antagonistic relations between bureaucracy and modem de-
mocracy, and between passive and active democratization. The chapter
on charisma (ch. XIV) adds the transition to democratic suffrage and
the selection of democratic leadership. It contains the important recogni-

96. Traces of Weber's objections to Michels' arguments are found in chs.

XI and XIV (cf. below, 991 and 1003, n. 8), apart from ch. II. Weber did not
publicly state his disagreement with Michels, whose academic career in Germany ^
had been forestalled by official disapproval of his political activities and in whose
behalf he had protested vociferously in an article on "The So-Called Freedom of
Teaching" (Frankfurter Zeltung, Sept. 20, 1908; cf. Matianne Weber Lebens-
bild, 361). In 191 3 Michels became co-editor of the Arckiv fur Sozialwhsenschaft
und Sozialpolitik. The two men corresponded extensively; Michels mentioned
in the second edition of his Political Parties that he took into consideration a
lengthy critique by Weber, to whom he had dedicated the first edition. The
difficulties of reconstructing Weber's critical thrusts are similar in the case of
Georg Simmel, whose career he tried to further against strong (in part anti
Semitic) resistance. In order to protect him, Weber terminated a projtaed
severe critique after writing a few pages of personal testimonial to Simincl ,md
a bitter denunciation of his academic and bureaucratic detractors,

97. Schumpeter, Capitalism, Socialism, and Democracy (3rd ed.; New York:
Harper & Brothers, 1950), ch. XXII. Schumpeter, one of the earliest Contibu-
tors to the Outline of Social Economics (1914), did not here mention Weber's
name, but there is a point-by-point correspondence of his description with pa: ,a^es
in both parts of Economy and Society. For Schumpeter's account of his
relationship to Weber, see his History of Economic Analysis, ed. Elizabeth Boody
Schumpeter (New York: Oxford University Press, 1954), 815-820, and his 1920
necrologue on Weber, reprinted in R. Konig and J. Winokelmaiin, eds., Max
Weber zum Gedachtnis, 64-7 1 .

io:l] Part Two: The Older Part XCIII

tion that, far from being irreconcilable, charisma and bureaucracy may
be interdependent. The adjustment of the Catholic church to bourgeois
democracy, especially in the United States, appears in the chapter on
political and hierocratic domination (ch. XV). The chapter on the city
(ch. XVI) deals with the theory of ancient and medieval democracy,
providing the historical contrast to modem democracy.* 8

(b) the dimensions of rulership. From the beginning, Weber
deals with bureaucracy not only in its formal aspects but as a status
group with vested interests. At the core of his approach to rulership is
the three-way struggle between ruler, staff, and subjects- The types of
rulership are distinguished by differing forms of appropriation — Weber
speaks of appropriation because the legal concept of property is too
narrow for many historical cases. Appropriation involves the means and
positions of administration, ranging from economic resources and
weaponry to managerial and political functions. The seizure of goods
and the extraction of services often originate in usurpation. Normally,
appropriation is carried through by a group rather than individuals.
Legitimacy is used to defend appropriation. Weber suggests, for example,
that European feudalism, although in many ways an "impossible" struc-
ture of domination, survived as long as it did because the vassals needed
the shield of legitimacy. This "functional" emphasis on legitimacy
pervades the whole exposition.

From the viewpoint of legitimation, the structure of the Sociology of
Domination is the following:

(O The historical models of bureaucracy, patriarchalism, patri-
monialism, feudalism, Standestaat, and military (and monastic) com-
munism are subsumed under the three types of legitimate domination
(chs.XI-XIV);

(2) As the greatest force of legitimation in history, the priesthood
is ceaselessly struggling for power with secular rulership (ch. XV); their
relationship is one of mutual antagonism as well as dependence;

(3) The city is the locus of specifically non-legitimate domination
in history (ch. XVI).

However, the bulk of each chapter is concerned not with legitimacy,
but with the various^strategies and resources of domination on the part of
ruler and staff. In each chapter, the military constituency, which was
basic to the analysis of the ancient states in the "Agrarian Conditions of
Antiquity," is treated next to the civilian administration. Each chapter
also contains a section on the ethos and education of the status groups,

98. In Part One, the theory of democracy is treated especially in ch. III:vfi
andx

XCIV

wrraoDucrtoN

Finally, the relation between each form of dorrrnation and economic
development is examined. Weber 6nds that it is easier to state the im-
pact or domination on the economy than vice versa. There are, for in-
stance, striking similarities between the class struggle in the Italian cities
of the Middle Ages andan the Roman Republic, although the economic
conditions were quite different. The reason lies in the limited nurhber
of administrative techniques available for effecting compromises among
the status groups of a polity. Therefore, similarities of political 'admin-
istration must not be interpreted as identical superstructures rising over
identical economic foundations: "These things obey their own law"
(below, 1309).

(c) the TE8MINOLOCY of domination. The terminological integra-
tion of the Sociology of Domination was a remarkable achievement. By
drawing on concepts from ancient, medieval and modern history Weber
succeeded in fashioning a terminology applicable to all three eras. It
should be remembered that this did not involve any assumptions about
historical sameness, but an insistence on typological gradation. Weber
addressed his comparative terminology to medievalists like Below and
Gierke, who wrote on both manorial domination (Grundherrschaft)
and the city, to ancient historians like Eduard Meyer, and to church and
legal historians like Rudolf Sonm. He demonstrated some of the typologi-
cal implications of their terminology.

The term Herrschaft has a very concrete and a very abstract mean-
ing. In historiography a Herrschaft is a noble estate, corresponding to
the French seigneurie and the English manor. In the philosophy of
history, Herrschaft is the basic category of superordination , and in this
sense it loomed large in the work of the young Marx, Weber uses the
term frequently in the historical sense and occasionally in the philosophi-
cal meaning, Sometimes he refers to the "domination of man over man."
However, this is not technically relevant to his typology. The Herr-
schaftsverband (authoritarian association)' 8 was a term widely used
after the late eigh teen-sixties when Gierke made it the standard contrast
to the Genossenschaft (equalitarian association). The term "patrimonial
state" was older still; it was introduced early in the nineteenth century by
Carl Ludwig von Haller. 10 * Haller fought against the liberal doctrines

99. Since Weber did not use the term Herrschaftsrerband as a contrast to
Genossenschaft, the translation "ruling organization" was chosen for the most
general formulation in the basic definitions (cf. below, 53} in order to exclude
the colloquial connotations of "authoritarianism." In Weber's terminology even the
most democratic organization is a Henschaftsverband.

100. Cari Ludwig von Haller, Restauration der Staats-Wissenschaft, oder
Theorie des nattirlich-geselHgen Zustands der Ckimare des kiinstlich'biirgeTlichen
entgegengesetzt (Waitenhur: Steiner, 1817/ 18), vols. II and III.

io:I ] Part Two: The Older Part X C V

of die social contract and for the diesis that all governmental authority
was the private property of the ruler. He also elaborated the early ideal
type of patrimonial bureaucracy. Whereas Haller equated patriarchalism
and patrimonialism, Weber contrasted the two concepts and defined the
latter as the political domination of a ruler with the help of his personal
apparatus (consisting of slaves, retainers, minmerudes). This change
reflected the controversy over the importance of Grundkerrschaft (ma-
norial domination) in Germanic history, which Weber downgraded in
favor of the charismatic origin of political rulership. His 1914 letter to
Georg von Below stressed the distinction between patriarchal and
patrimonial domination:

Although I have good reason to think very modestly of my own
expertise, I have no doubt that you are right [about the existence of gen-
uine political authority, not just private powers, in European feudalism].
It is astonishing that the old contrary theory — to which, admittedly, I
too once adhered — is still so persistently defended. . . . Terminologically,
I must limit the concept of patrimonialism to certain kinds of political
domination, I hope you will find that I have sufficiently emphasized the
absolute distinction between domestic, personal and manorial authority,
on the one hand, and political Herrschaft on the other, which is none of
these but rather military and judicial authority. This main thesis of your
book will find no objection from my side. I will only show that this
difference is as old as history. 101

Weber demonstrated his point by drawing on examples from An-
tiquity and the Chinese empire. Patrimonialism was the most important
kind of administration before the emergence of modem bureaucracy.
In the most centralized case, it constituted a patrimonial-bureaucratic
administration with a "state-socialist" oikos economy — Rodbertus' con-
cept — ; European feudalism was its most fragmented case, with its sole
and limited analogy in Japan. Only European feudalism developed the
Standestaat, the consociation of ruler, nobility and honoratiores under a
quasi -constitutional division of powers. Feudalism was for Weber a
marginal case of patrimonialism, because the feudal vassal was a patri-
monial lord in relation to his own retainers and because the feudal
principle did not completely replace the patrimonial administration of
the realm. Feudalism had charismatic features as well; the status group
of warriors was first distinguished by personal military prowess and later
by "noble" descent.

Precisely because feudalism was a unique medieval phenomenon,

Weber's distinction between feudalism and patrimonialism has consider-

■■^^
10 1. Weber's letter of June 21, 1914, printed in G. von Below, Der Deutsche
Stoat des Mittelalters, 2nd ed. (1925), xxiv i.

X C V I INTRODUCTION

able terminological utility today when "feudalism" is all too often an
indiscriminate pejorative term referring to sundry situations in all coun-
tries where large-scale landownership and political power are still closely
related. The concepts of patrimonialism and personal rulership — divested
of traditionalist legitimation — are frequently more applicable to the
New States than feudalism, bureaucracy or charismatic rulership. 102
If patrimonialism has been conceptually underemployed, charisma
has been used indiscriminately to label almost all non-bureaucratic forms
of leadership. 103 Weber chose the term to characterize, first of all, the
relationship between the military chieftain and his free following, the
subject of his 1905 essay (sec. 4 above). He secularized Rudolf SohrnV
notion of the charisma of the Christian church. In his major work on
Church Law (1892), Sohm, a devout believer and conservative colum-
nist, had described the church not as a "legal" but a "charismatic" or-
ganization — i.e., an organization established by virtue of divine inspira-
tion, not man-made law. After using the concept of charisma in its
religious connotations in the Sociology of Religion, Weber apparently
decided that it could also denote the self-legitimation of political leader-
ship, a usurpatory challenge from the viewpoint of patriarchal, patri-
monial and bureaucratic legitimacy.

Throughout history political and religious charisma have warred and
cooperated with one another. The secular rulers had to face, in one
way or another, the institutionalized charisma of the priesthood —
theocracy. Since Weber concerned himself with the charisma of both
powers, he differentiated the traditional notion of theocracy — still his
terminology in the "Agrarian Conditions in Antiquity"— into a typology
of hierocracy contrasting with caesaropapism. 1 "* The latter term denoted
the complete control of the secular ruler over the church, and since this
was true of both the Anglican and Lutheran rulers, the phrase also suited
Weber's penchant for nominalist irony. 30S Successful political usurpers
or their successors often endeavored to fortify their rule through religious

102. For a proposal along these lines, see my "Personal Rulership, Patri-
monialism and Empire- Building in the New States," World Politics, XX, 1968,
1 94-206.

103. On the indiscriminate application of the concept of charisma, cf. Rein-
hard Bendix, "Reflections on Charismatic Leadership," Asian Survey, VII, 1967,

34I-352-

104. In this he followed the terminology of Byzantine studies; cf. Religion
m Gesckichte und Gegenwwt, I (Tubingen: Mohr, 1909), cols. 1527-31,

105. The analytical advance made by Weber can be seen by comparing, for
example, Wilhelm Roscher's treatment of "priestly aristocracy" in his Potitik:
Geschichtliche NatuTlehre der Monarchic, Aristokratie und Demokratie (Stutt-
gart: Cotta, 1892), 87-117.

io:l] - PartTwo: The Older Part , XCVII

legitimation: the Foremost European examples were Charlemagne and
Napoleon I. Whereas these two rulers controlled the church, others were
more dependent. European history was profoundly influenced hy the
great clash and subsequent stalemate between emperor and pope — a
subject about which Weber wrote his first major essay at the age of
thirteen 10B This gave the Italian cities their historic opportunity to gain
autonomy for a time from the patrimonial and hierocratic powers and
to usher in the Renaissance with its unbridled individualism: an age of
illegitimacy.

(d) the city: usurpation and revolution. 107 Jt has been asserted
occasionally that the Sociology of Domination, with its "static" ideal
types, cannot explain revolutionary change. Were this true, Marxism as
well could not have advanced a theory of revolution, since its "laws"
and developmental constructs are nothing if not ideal types — as Weber
pointed out in i9O4. t08 The fact is that his own theory of revolution
appears in the guise of usurpation and non-legitimate domination because
of its attention to administration and legitimacy, marginal concerns to
Marxism. Weber looked more closely at the consequences of the seizure
of power than did Marx in spite of the "dictatorship of "the proletariat";
he saw that revolutionary domination can survive only when an efficient
administration suppresses the expropriated former holders of legitimate
power.

The city as an autonomous, oath-bound commune of armed men
existed only in the Occident, and then only in Antiquity and the Middle
Ages. It was the specific locus of revolutionary domination in two re-
spects: It was a "state within a state" erected by the patricians against
the patrimonial rulerships with their traditionalist legitimation; it also
was the scene of the uprising of the "people" against the patricians who
had in turn assumed the mantle of legitimacy. The people's leaders
created another "state within a state." Weber maintained that the oldest

.106. In the same year, 1877, -Weber wrote an essay on "The Roman Empire
from Constantine to the Teutonic Migrations"; at the age of fifteen he wrote
"Reflections on the Character, Development and History of the Indo-Germanic
Peoples." These were standard topics in the classical schools, but the essays also
indicate the early origins and the continuity of some of Weber's basic interests.

107. The chapter^ on the city was the fulfilment of a project that Weber
had declared to be worthwhile in 1908/9 (cf. above, p. xxxi); he took himself
by his own words and demonstrated how the ancient polis and medieval city
could be compared to explain their differences and how an indirect contribution
could he made to the study of modem democracy,

108. Cf. Shils and Finch, eds., Methodology . . . , 103. For a comparison of
the ideal -typical constructs of Marx and Weber, see Judith Janoslca-Bendl,
Methodologiscke Aspekte des Idealtypus. Max Weber ttnd die Soziologie der
Geschichte (Berlin; Duncker & Humhlot, 1965), 89-114.

X C V I 1 1 INTRODUCTION

historical records of the city as a commune proved its revolutionary
character, but that this was often obscured in documents which pur-
posively hid usurpations of political power. 106

The first great usurpation of the early Middle Ages was the "revo-
lutionary movement of 726 that 'led to the defection of Italy from
Byzantine domination and centered around Venice. It was called forth
especially by opposition to the icon destruction ordered by the emperor
who was under the pressure of [the Islamic sympathies of] his own
army. Thus the religious element, although not the only factor, triggered
.the revolution."" After a period of patrician rule, the Italian popolo
rose under its leaders and established "the first deliberately nonlegitimate
and revolutionary political association" (below, 1302).

Weber contrasted the patrician city with the plebeian city of the
Middle Ages and of Antiquity, exploring the different forms of class
struggle in each type and era. He stressed the remarkable parallels be-
tween the Italian papolo with its capitano and the ancient Roman plebs
with its tribune. In the absence of traditional legitimation, the tribune
was sustained by armed popular support. He checked the power of the
senate and instigated the flebiscita.

Democratization means the political expropriation of the upper
strata, which in these historical cases were as "closely policed, disen-
franchized and outlawed as is the Russian bourgeoisie by Lenin. The
basis of democratization is everywhere of a military nature; it lies in the
emergence of a disciplined infantry. . . . Military discipline signified the
victory of democracy, for the wish and the need to call on the nori-
knightly masses gave them arms and thereby political power. The
parallels to the German revolution of 19 18 are obvious." 111 However,
democratization by no means leads to the waning of domination. Ancient
and medieval democracy passed through the state of the tyrannis and the
signoria before the city state disappeared, reverting to patrimonial ruler-
ship through internal transformation or external defeat. But this his-

109. Weber rejected Sombart's theory that "ground rent is the mother of the
city" (cf. Economic History, 239). The two men differed in their interest and
interpretation of the city. Sombart was primarily concerned with the economic
aspects; cf. Der moderne Kaptalismus, II, 176-249, and his "Der Begriff der
Stadt und das Wesen der Stadtebildung," AfS, XXV, 1907, 1-9. In dealing with
the city as a political phenomenon, Weber followed the tradition of ancient and
medieval history. However, he reversed the standard political definition of the
German medieval city as a se If- gu veming body with a town courtcil subject to
confirmation by the legitimate overlord, and instead emphasized the aspect of
usurpation. For the older definition, sec Fieiherr Roth von Schreckenstein, Da J
Patriziat in den deutschen Stiidten (Tubingen: Mohr, 18 ;6), 28.

no. Wirtsckaftsgeschichte, 274; cf. Economic History, 236.

in. Wirtsckaftsgeschickte, 278!., cf. Economic History, 240.

io:I] _ Part Two: The, Older Part XCIX

torical "cycle" had very different results in the two eras : In Antiquity
a universal empire came into being, suppressing private capitalism; at
the beginning of modern history, the competing patrimonial-bureaucratic
states created the European balance of power, one of the preconditions
of modern capitalism. They further developed the rational administra-
tion first promoted by the non-kgicimatfi dictatorship of the Italian
signoria. Thus the modern state and modern democracy were not the
direct successors of the medieval city. Their rise was prepared by the
struggle for representation in the Siandestaat and the absolutist state,
which preceded their violent establishment in the American and French
revolutions.

From the viewpoint of legitimacy and administrative control there is
no basic difference between coups d'etat and mass uprisings. Weber's
reference to the Russian and German "revolutions" was more than a
mere illustrative analogy. Structurally, the modern state, whether par-
liamentary, plebiscitary or a "people's democracy," is one city. Non-
legitimate domination is at the root of modern democracies, whether they
are more libertarian or more authoritarian. The United States, the "first
new nation" in Seymour Martin Lipsei's phrase, came into being in
rejection of monarchic legitimacy and instead created a polity that, in
analogous terms, resembles the Roman Republic: its President (tribune)
and the plebeian House of Representatives contrast with the Senate, an
imitation of the House of Lords, as the most traditionalist and aristo-
cratic element.

It is a moot point which contemporary state should be considered
less similar to a city and closer to patrimonial rulership. Hierocracy
and caesaropapism continue to exist in some of their traditional ways,
but more frequently in a new secularized form. Secular intellectuals have
replaced priests as the new legitimize^., especially in the New States.
Weber did not foresee how quickly snd terribly totalitarianism would
.seize and exercise power, although he described it as an "objective
possibility" (below, 644, 661, n.4). Toward the end of his life he con-
sidered it more likely that a Bonapartist coup d'etat might occur in
Bolshevist Russia or in Weimar Germany, a reasonable guess on the basis
of historical precedent. But Weber had no deterministic view of history:
"The continuum of cultural development \r. the Mediterranean-European
realm has up to now shown neither completed 'cycles' nor an unam-
biguous unilinear development." 112 Despite his fulminations, he did
not consider the oppressive dominance of bureaucracy politically in-
escapable (cf. below, 991)- In his showdown with Oswald Spengler in

112. "Agrarverhaltnisse . . . ," GAzSW, 278.

U INTRODUCTION

February of 1920, Weber extracted the admission from the author of the
Decline of the West that his morphology was historical poetry. Domina-
tion in large-scale communities was for Weber the only historic in-
evitability — a point directed at the same occasion against a young com-
munist who was dreaming of the perfect commune of intellectuals and
proletarians in Siberia. 11 *

If the course of history is not predetermined but domination ines--
capable at the same time that its forms are limited, a historically saturated
typology is the best analytical tool for the researcher. This is the ultimate
rationale for the typologies of Economy and Society.

II. PART ONE: THE LATER PART

Between 1918 and 1920, during and after the Empire's collapse,
Weber turned to the terminological summary. In contrast to Part Two,
where after 1918 he revised only the chapter on bureaucracy, he rewrote
the definitions many times. Weber spent so much energy on the cate-
gories because he recognized that the discursive exposition of his com-
plex and novel terminology made retention difficult. Several colleagues,
among them the philosopher Heinrich Rickert, had told him that the
Stammler critique and the essay on "Some Categories of Interpretive
Sociology" were excessively hard to read. Weber heeded their advice and
simplified the terminology. He divided the text into numbered main
definitions and small-print comments, a device frequently employed in
the older literature, as in Scbonberg's Handbook of Political Economy.

In the first edition of Wirtschaft und Gesellschaft, Part One was
published under the title now carried by Part Two, but Weber liked to
call it his Kategorienlehre or casuistry. In those last months of his life
he seems to have expressed some satisfaction with his progress — with
the feeling, however: "People will shake their heads." He expected
resistance to bis redefining of well-known historical, economic, legal and
theological terms for his sociological purposes. Thus, he wanted it clearly
understood that his definitions were nothing more than a clarification
of his own terms to be tested by their scholarly yield; they were not
an attempt to impose a new terminology on his colleagues. Hundreds of
students attended bis courses at this time — in Vienna in 1918 and in
Munich in 1919/20 — but the course on the categories drove them away
en masse. "* Upon their urging, Weber compensated the students for

113. Cf. Marianne Weber, Lebensbild, 6S^ff., and Eduard Baumgarten, ed.,
Max Weber: Werk utid Person (Tubingen: Mohr, 1964), 554f.

114. In a period when political agitation is again an issue at American uni-
versities, it may be worthwhile to recount that Weber opened the course on the
most general categories of sociology with a statement showing that he was for

Part One: The Later Part

his definitions with his lectures on economic history. It is certainly true
that the definitions are not "readable." Part One is really a reference
text, and it would indeed have greatly facilitated the reading of Part
Two had Weber lived to revise the old terminology in the light of the
new. The discrepancy as it now exists makes additional demands upon
the reader of both parts, but it also offers researchers the opportunity to
work with Weber's alternative terminology.

When SchmoIIer wrote his critique of Sombart's Modem Capitalism
he advanced a complaint that might have applied also to -Weber: "Every
few pages we find the sentence: 'I call this such and such,' and the reader
is overwhelmed by a flood of new names, new etiquettes and pigeon-
holes.""' Sombart considered his own terminological introduction a
"considerable esthetic impairment" but an inevitable nuisance since he
wanted to introduce a personal terminology; similarly, Weber acknowl-
edged the stylistic awkwardness of his precise definitions. Sombart called
for an esthetic science: "The guilt toward all living things that every
science brings upon itself [by its deadening generalities] can be expiated
only if scholarship produces new life through its creations, shaping them
into works of art . . . It seems to me that we should strive to make a
scientific scheme beautiful in itself." 11 * Weber never advanced such an
exuberant demand, but the casuistry of Part One, which is so much
indebted to his legal training, does indeed have an esthetic quality,
which will be revealed especially to the reader who works his way first
through Part Two with its descriptive richness.

Weber finished three chapters of Part One and the beginning of
chapter IV. These are the only chapters he could rework in, the proofs. 11 '
Both parts of the work begin with basic definitions of social action and
then take up economic action. In Part One, however, the typology of

"profession" even as he was against "indoctrination." In Marianne Weber's phrasing
(Lebensbild, 673^), he wanted to say a "first and last word on politics, which has
•no place in the lecture hall and in science, but rather belongs in an arena where
the free airing of opposing judgements is possible. . . . We can have only one
common goal* To turn the Versailles treaty into a scrap of paper. At the moment
this is not possible, but the right of rebellion against foreign domination cannot
be foresworn. Now we must practice the art of silence and return to the sober
tasks of everyday life." Cf. Baumgarten, ed., of. tit., 553, 716.

115. SchmoIIer, loc. cit., 297.

116. Sombart, op. cit., I, xxx.

117. The translation of chs. I — II of Part One was drafted by Henderson and
reworked by Parsons, who did the subsequent chapters on his own. Terminologi-
cally, the original translation diverged from the German text by using "type" and
"system" much more freely than did Weber, who in general spoke of "type" only
when he really meant "ideal type" and for the rest employed terms such as "kind"
or "phenomenon"*, the term "system" was rarely used by Weber.

CII

INTRODUCTION

domination appears already in ch. Ill; classes and status groups (ch. IV)
follow rather v $ban precede it. Notes found with the manuscript indicate
that Weber intended to go on to status groups of warriors. At least two
chapters anticipated in the text of Part One are missing altogether: One
on the more "universal" groups (household, Ian group, etc.) treated early
in Part Two, and another one on the theory of revolution (cf. the an-
ticipatory reference below, 2^jS), corresponding in Part Two to the
chapter on the city as non-legitimate domination (ch. XVI). This chap-
ter would have dealt with the German "and Russian revolutions within
^ a typology designed to give a more precise description than that afforded
by the mere label "revolution,"

Almost half of the first chapter of p art One is given over to a simpli-
fied presentation of the meaning of "interpretive sociology" and the con-
cept of "social action." 118 This is Weber's easiest methodological state-
ment, but because of its very conciseness the reader cannot afford to
disregard the other methodological writings. In the second half of the
chapter, the basic definitions of social action and association, Weber
abandoned the older, more differentiated typology of Part Two (cf.
below, Appendix 1). He changed Gemeinschaftshandeln into soziahs
Handeln (social action) and Gemeinschaft mostly into Verhand (or-
ganization). This made it possible to contrast Vergeme'mschaftung and
Vergesellschaftung (communal and associative relationships) in sec. 9
and to come closer to Tonnies' terminology without accepting his basic
dichotomy. Tonnies' distinction had gained wide currency after the turn
of the century, especially after the second edition of his wort (1912).
Apparently Weber felt that he should not insist on a quite different
terminology. Weber treated Tonnies considerately as a comrade-in-arms
in the struggle for social research and expressed himself with somewhat
distant politeness about Gemeinschaft nnd Gesellsckaft (1887), but
there is no indication that the work was a major influence on his in-
tellectual development, and Economy and Society appears partly con-
ceived in opposition to it. 11 *

118. For recent additions to the large literature on social action, see Helmut
Gimdt, Das ioziaU. Handeln ah Grundkategorie erfahmngswissenschaftUcher
Sd&ologie ("Veroffentlichungen des Max Weber Instituts der Universitat
Miinchen"; Tubingen: Mohr, 1967); on the origin of the terminology of social
action, see Johannes Winckelmann's introduction to Gimdt, ibid., r— zo; For an
interpretation of Weber's theory of science in the light of subsequent develop-
ments in the natural and social sciences, see Winckelmann, 'Max Webers
Verstandnis von Mensch und Gesellschaft," in K. Engisch et al., eds., Max
Weber: Gedtichtnisschrift der Litdurtg-Maximilians-Universitat Munchen, 195-

243-

119. On the theoretical differences between Tonnies and Weber, see the

definitive critique of Tonnies by Ren£ Konig, "Die Begriffe Gemeinschaft und

io:ll ] Part One: The Later Part C 1 1 1

In communal as well as associative relationships conflict is normal
(sec. 8). As in the case of power and domination, the definition of con-
flict has been wrenched out of context in discussions of Weber's orienta-
tion to power. He certainly, was a political realist, but the purpose of the
section is the definition of peaceful and regulated conflict ("competi-
tion") as against social selection and the free-for-all. The target of the
section is Social Darwinism. Unrestrained struggle ard social selection
are marginal to Weber's analytical interest. Up to now the reversal of
a key sentence has confused both German and English readers. Instead
of the sentence: "The treatment of conflict involving the use of physical
violence as a separate type is justified by the special characteristics of
the employment of this means and the corresponding peculiarities of the
sociological consequences of its use" (Parsons, ed,, Theory, 133), it must
read: "The conceptual separation (Ahsonderung) of peaceful [from
violent] conflict is justified by the quality of the means normal to it and
the peculiar sociological consequences of its occurrence" (below, 38).
Weber goes on to emphasize the importance of the rules of the game as
against inherent personal qualities (whether social or biological) and
states that "we want to speak of conflict only when there really is com-
petition" (cf. below, 39). He refers ahead to ch. II, where economic
action is defined "as a peaceful use of the actor's control over resources"
(below, 63),

The chapter on the sociological categories of economic action is
remarkable for its length, the same as chs. I and III together. It is likely
that Weber wanted to compensate for the relatively brief economic
casuistry of Part Two. However, the many pages of seemingly dry defini-
tions and comments owe some of their length — and hidden fervor — to
Weber's political involvement with the problems of postwar economic
and political reconstruction in the wake of the Empire's collapse and in
the face of the victor's harsh demands at Versailles. The chapter also
reflects the phenomenon of the wartime "state-socialist" economy and
the syndicalist and socialist p oposals for economic reconstruction. Some
of Weber's comments on the much-debated question of the economic
feasibility of socialism are definitely time-bound; other passages in this

Geselischaft bei Ferdinand Tonnies," Kdlner Zeitschrift fiir Sozfologie, VII, 195;,
348-420. In the American literature the relationship apparently was misperceived
for two reasons: CO the early date (1887) of Tonnies work, which for a long
time received little attention, and the fact that the Gemeinschaft — Geselischaft
dichotomy became well-known so much earlier than Economy and Society. For
illustrations, see Robert Nisbet, The Sociological Tradition (New York: Basic
Books, 1966), 79 and 326; Robert Presthus, Men at the Top. A Study in Com-
munity Power (New York: Oxford University Press, 1964), 9.

CIV

INTRODUCTION

chapter show him years ahead of the critique that welfare economists later
were to direct against classical economics, even though he did not use
their technical apparatus.

While he was working intermittently on the economic categories,
Weber in speeches and statements strenuously opposed the nationaliza-
tion of the major industries. He considered neither the remaining state
bureaucracy nor the inexperienced functionaries of the socialist labor
movement capable of running the economy. In April, 1920, when the
Democratic Party he had helped to establish in November, 1918, asked
him to serve on the Nationalization Commission, he resigne'd, explaining
that "the politician -must make compromises — the scholar must not
whitewash them." 110 A few weeks later he died.

1 1 . Political Writings

"Parliament and Government in a Reconstructed Germany" (Ap-
pendix II) is offered for three reasons: (1) to compensate for the un-
written part on the sociology of the state; (2) to provide a corrective to
the one-sided reception of the chapter on bureaucracy (ch. XI) — as if
Weber had somehow missed the facts of bureaucracy as a vested interest
group or a network of informal cliques; (3) to introduce to the English
reader one of his major political writings, almost all of which are un-
translated. 121

The essay is' a revision of newspaper articles originally written for

no. E. Baumgaiten, ed.. Max Weber: Werk und Person, 530; cf. also ibid.,
608 and Wolfgang Mommsen, Max Weber und die deutscke Politik 1890-1920
(Tubingen: Mohr, 1959), 303?.

111. In the fourth edition of Wirtschaft und Geselhchaft, as a substitute for
the chapters on the modem state and its parties that Weber did not live to write,
Johannes Winckelmann provides a Sociology of the State constructed out of
passages from Economic History, "Politics as a Vocation," and "Parliament and
Government" with the omission of the more polemical and time-bound sections
(for a separate edition, see Max Weber, Slaatssoziologie, ed. Johannes Winckel-
mann; 2nd rev. ed., Berlin: Duncker & Hum blot, 1966). In the English edition
this imaginative didactic effort has been replaced by a continuous translation of
the last essay. This appeared desirable because of the English reader's lack of
familiarity with the political writings; by contrast, the Economic History was the
first Weber translation (1917) and "Politics as a Vocation," a philosophical
statement rather than a polemical article, is already well-known in the Gerth
and Mills translation (From Max Weber . . . , 77-128). — The list of Weber's
political newspaper articles and journal essays is lengthy; it includes two essays
on the 1905 Russian revolution, "On the Conditions of Bourgeois Democracy in
Russia" and "Russia's Transition to Pseudo-Constitutionalism" (both 1906). The
Gesammelte PoZitiscfie Schriften comprise only part of the political writings.
The Gerth and Mills volume contains somewhat more than one quarter of

/ 1 ] Weber's Political Writings CV

the leftwing-liberal Frankfurter Zeitung, one of the best-known Euro-
pean newspapers until its suppression by the Nazis. The articles ap-
peared in the summer of 1917, after Woodrow Wilson entered the war.
They launched a sensational attack on the political incompetency of the
Imperial and Prussian bureaucracy; the paper was subsequently put
under pre-publication censorship, but the very publication of the articles
is enough to show that even in wartime Imperial Germany was far less
oppressive than Nazi Germany.

Weber made his impassioned plea for political democratization at a
time when reform seemed highly uncertain and revolution only a slight
possibility. His siding with parliamentarism was by no means a sudden
conversion under the shadow of military disaster, as it was for Luden-
dorff and the general staff in September 1918. Weber had for rrfany
years advocated parliamentary government. He considered himself part
of a vigorous but loyal opposition to the monarchy. He argued from
premises of national interest, partly out of deep conviction, partly for
tactical reasons, hoping that parliamentary government would make pos-
sible a more rational politics in the international no less than the national
interest. He wanted Germany to play a major part in the rather dis-
cordant concert of European powers, but he never advocated her hegem-
ony over Europe. In domestic politics he wanted to be recognized as a
"class conscious bourgeois" who opposed the entrenched Junkers and
the rightwing romantics no less than the petty-bourgeois labor move-
ment and the Utopian leftwing intellectuals. He positively scorned the
litterateurs of the right and left — vvitness his outbursts in "Parliament
and Government." Weber took a humanitarian commitment for granted
but was convinced that it would suffer from noisy display and moralistic
sermonizing. He saluted pacifists as well as revolutionaries with a pure
"ethic of ultimate ends" (Gesinnungsethik). But he believed in politics
as the art of the possible — the morally imperative compromise in a
world of irreconcilable ideologies and raw interests.

These few remarks cannot do justice to Weber's politics or to his
political critics. 121 The reader of "Parliament and Government" should"
bear in mind that it represents only one phase of Weber's politics, neither
the early period when the very young professor intentionally shocked his
father's liberal generation with tough nationalist rhetoric in his Frei-

"Suffrage and Democracy in Germany" (1917) under die heading "National
Character and the Junkers" {of. at., 386-95). Weber's political writings are,
of course, partly dated; however, in part they can also be read as discussions of
democratization, especially the issue of political development in "new" states.
12a.. For a review of the critics, see my "Political Critiques of Max Weber:
Some Implications for Political Sociology, American Sociological Review, vol.
30,- 1965, 213-23.

C V I INTRODUCTION

burg inaugural address of 1895 — °*dy to regret it Iatrr — nor the last
phase when the despairing democrat returned from the Versailles treaty
meetings with grave forbodings, just like John Maynard Keynes. Weber
foresaw Wilson's failure at Versailles. In an unsigned editorial statement
in the Frankfurter Zeitung (October 27, 1918) he lectured his colleague-
in-politics on the hard facts of the power balance and the art of peace-
making:

Men of good will and understanding do not question President Wilson's
sincerity. However, it appears that he does not sufficiently grasp the
following: If the German government accepts his armistice conditions,
which make any further military resistance impossible, not oniy Germany
but he too would be eliminated as a major factor in the peace settlement.
His own position as arbiter for the world rests on the fact that the Ger-
man army is at least strong enough to avoid defeat without the help of
American troops on the Allied side. Were this to become different, the
. absolutely intransigent elements, which no doubt exist in other enemy
countries, would gain the upper hand and simply push the President
aside with polite thanks for his previous support. His role would be over,
unless he went to war against his present allies. The German govern-
ment, too, should have considered this state of affairs. Even though an
armistice is desirable to avoid unnecessary bloodshed^ it would certainly
have been better not to focus deliberations so FJtcIusively on the armistice
offer as has been done. Peace negotiations could take place without an
armistice if the enemies insist on continuation of the slaughter. 12 *

Inextremis, Weber was not averse to a levee en masse and guerrilla
warfare ("national wars of liberation"), as he demonstrated in his speech
at an anti-Versailles meeting of the University of Heidelberg in March,
1919; he protested against what appeared to him a flagrant violation of
Wilson's promise of self-determination for all peoples. Such national
pride, however, did not prevent rightwing students from picketing his
house and disrupting his lectures. Emotional appeals aside, he devoted
much constructive energy to the drafting of the Weimar constitution,
through his writings and as member of the revolutionary government's
planning committee. 1M

123- GPS, 435-

124. In the past, Weber's contribution to the presidential features of the
Weimar constitution was exaggerated by friend ana foe. For a correction, see
Gerhard Schulz, Ziinschen Demokratie und Dtktatur: VerfassungspoUt^. wtd
Reichsreform in der Weimarer RepubUk (Berlin: de Gniyter, 1963), I, 114-42.
Schulz points out that fax from taking a blunt position in favor of a "Caesarist"
leader, Weber gradually shifted his opinions in response to the changing political
situation and the diversity of opinion in committee meetings. Eventually he came
to favor a popularly elected President as a mediator between the Reichstag and
the States. Cf. also Weber, GPS, 394-471, 486-89.

1 1 ] Weber's Political Writings C V 1 1

In essence, Weber stood for the rational support of s political order
that can be affirmed in most essentials. His sociology can serve the
self-clarification of critical-minded organization men in industrialized
and democratized society. This was the ultimate dialectic in Weber's
position: he was a sharp critic of human and institutional failures, but
basically a moralist with reformist convictions, not a revolutionary
temper. 1 "

12. On Editing and Translating Economy and Society

.. There are some misunderstandings abroad about the readability of
Economy and Society. They relate in part to the original, in part to the
translations. To begin with, it must be pointed out that Weber wrote
lucidly and subtly. He wrote more clearly than did most of his colleagues,
including Sombart, Tdnnies, Troeltsch and his own brother Alfred, not
to mention the legion of "ordinary" professors of his time. Weber does
not stand in the tradition of German philosophical prose with its murky
profundity that has usually suggested dangerous obscurantism to Anglo-
Saxon readers. Considering that most of Economy and Society is a first
draft, Weber's power of formulation proves extraordinary. Yet there are
difficulties:

CO Since Part Two was written with great speed, stylistic editing
and judicious cutting would have been helpful to the reader, but this
would also have been incompatible with the requirements of a complete
edition.

(2) Weber never wrote a well-wrought book. His larger works are
Iongish problem-centered 'research papers. Economy and Society is the
only work conceived for a wider audience, but it never reached the stage
of final literary form; moreover, it was simply not meant as a trot for
introductory courses, or as the kind of polished study in cultural pessi-
.mism so popular in the riineteen-twenties. v

(3) Weber uses a profusion of quotation marks as an alienating
device to indicate that he employs familiar terms with reservations, with
a new meaning, or in an ironic sense. This habit was ihqjroiinterpoint to
his concern with terminological precision and at times is a drawback.
In the translation, the quotation marks were used more sparingly.

(4) Weber tended to overqualify his sentences, using terms such as

12$. Foe a sketch of tfak dialectic, see Guenther Roth and Bennett M.
Berger, "Max Weber and die Grgraized Society," New York Times Book Review,
April 3, 1966, 6 and 446 ^

C V 1 1 1 INTRODUCTION

"perhaps," "more or less," "in general," "as a rule," "frequently but not
always," etc. This reflected the difficulty both of formulating historical
generalizations and of identifying a specific cause. Weber's sense of
caution became a stylistic mannerism.

Similar to the second and third volume of Das Kapital, Weber's
work was edited from literary remains written in a scarcely legible hand-
writing. The early editions of Wirtsckaft und Gesellschaft contained
hundreds of reading and identification errors. For thirty-five years this
distorted, or outright destroyed, the meaning of many passages and
obviously affected the translations. In 1956, after many years of pains-
taking labor, Johannes Winckelmann published his critically revised
(fourth) edition. In close cooperation, Winckelmann and the English
editors have decided on a large number of further changes in wording,
clauses, names and dates; some of these have been incorporated in the
1964 German paperback edition. The projected fifth edition will identify
all these changes; listing them in the English edition would have been
too cumbersome. The definitive German edition will be almost identical
with the present English text, with the exception of Winckelmann's
compilation of the Sociology of the State. 1 * 8 However, the German and
English edition differ in the subheadings of the chapters. The manu-
script had no subheadings, it seems, excepting the Sociology of Law,
which in turn had no tide. The early editions summarized the chapter
contents, often inadequately, below the chapter headings. Winckelmann
extensively revised them. The English editTS&>roceeded at their own
discretion and used subheadings in the text% improve its readability.

The systematic checking of the text required considerable library
research, invisible where there are no corrections and annotations. The
revision of the extant translations proved almost as time-consuming and
difficult as the new translation since every sentence had to be compared
to the German £ext and changed if if appeared necessary for textual,
terminological and, more rarely, stylistic reasons. Weber's skilful use of
German syntax permits more complex construction than is feasible in
English. Thus, Weber is not really improved by "streamlining," by
breaking up his carefully balanced and qualified sentences into a series
of linear constructs. A more linear "rendering was inevitable in the
English version, but our inclination was to retain, and in some cases to
restore, Weber's architecture. However, in most cases pragmatic pre-

126. Like the German paperback edition of 1964, the English edition omits
Weber's essay on "The Rational and Social Foundations of Music," which was
not part of the original but was appended to the second German edition. For an
English version, see the translation by Don Maitindale, Johannes Riedel and
Gertrude Neuwirth (Carbondale: Southern Illinois University Press, io;8).

ii. } On Editing and Translating Economy and Society C I X

vailed over stylistic considerations, whether the revision of previous
translations or our own formulations were involved.

In most academic translations, the task involves prosaic accuracy,
not an esthetic recreation. Academic translation should properly be team-
work. Individual "heroism" is bound to be affected by the limitations of
any single translator, as was proven by Parsons, Fischoff and Kolegar.
Some of the English translations have been undertaken by two men, one
familiar with each language. This arrangement could not, however,
lighten the burden of the primary translator. Our translation was aided
by two-fold familiarity with the original language, which permitted col-
lateral reading and prevented premature closure by either one of us.
Our revision of the extant translations has also been in the nature of *
collateral reading, backed by the wisdom of hindsight. The ideal trans-
lation, however, requires a third man : the stylist in the language of trans-
lation. Our third man was missing.

Everett C. Hughes once remarked that, as a matter of. principle, a
work should only be translated as a whole. Each piecemeal translation
tends to reduce the incentive for publishing the whole. This leads to
unanticipated and fortuitous intellectual consequences. Theoretical de-
velopments in American sociology have been considerably influenced
by the vagaries of the Weber translations. Thus, the Gerth and Mills
edition created the impression that the Sociology of Domination centers
about the contrast of bureaucracy and charisma. Parsons' translation of
only Part One perforce attenuated the historical dimension of the work
and led some writers to believe that Weber did not follow up on his
categories. 117 Weber's case is far from exceptional. In recent years it has
become clear that the translations of Durkheim and Nietzsche have had
similar distorting consequences.

Without sustained support by foundations and institutes the desid-
erata of academic translation cannot be fulfilled in most cases- This
support has been lacking largely because translation and editing are the
most underestimated kind of work in the social sciences. But as long as
sociologists continue to lean on the Sociological Tradition, the need for
translation will persist. Moreover, in an era of world-wide comparative
research the linguistic problem will be perpetual without adequate trans-
lation facilities and better linguistic training for social scientists.

127. Since David Easton explicitly aimed at a forceful and incisive improve-
ment of Weber, it appears legitimate to observe that his A Systems Analysis of
Political Life (New York: Wiley, 1965) is a major example For some unintended
consequences of the partial translations by Gerth and Mills and by Parsons. The
Rheinstein-Shils translation, which would have corrected part of his interpreta-
tion, was not consulted. This may be indicative of the difficulty to see partial
translations as part of a whole. (See Easton, op. cit., 183, 281, 283, 301 ff.)

INTRODUCTION

13. Acknowledgements

I owe thanks to many persons, foremost to the following:

Reinhard Bendix, who has carried on the tradition of comparative
study in creative adaptation to the American setting. In the late nineteen-
fifties he gave me an opportunity, without insistence, to feel my way into
Weber's work, to overcome some early preconceptions, and to watch the
writing of his Max Weher. An Intellectual Portrait (1960);

Juan Linz, a scholar of Weberian breadth, who insisted for a Ion g
time on the necessity of a complete edition and kept wondering skeptic-
ally who would take on the task;

Benjamin Nelson, a critic with a Weberian temper, who suggested
"rulership" as one translation of Herrschaft and insisted on standards
to which mortals have difficulty measuring up;

My wife, who accommodated my abstract preoccupation with the
"oct-opus" in her sensuous household of flora and fauna and took out
time to improve the style of the introduction.

I greatly appreciate the support of the Research Foundation of the
State University of New York (Stony Brook), which granted me fellow-
ships in the summers of 1963 and 1964; the assistance of the Department
of Sociology, University of California at Davis; the typing of Jeannette
Freeman, who claims that she gained an education through it.

It was a great pleasure to share the task with Claus Wittrch, narive of
my hometown and fellow graduate of its classical school where we
learned our basic linguistic and historical skills.

PART ONE

Conceptual Exposition

CHAPTE

BASIC SOCIOLOGICAL
TERMS

Prefatory Note

An introductory discussion of concepts can hardly be dispensed with,
in spite of the fact that it is unavoidably abstract and hence gives the
impression of remoteness from reality. The method employed makes no
claim to any kind of novelty. On the contrary it attempts only to formu-
late what all empirical sociology really means when it deals with the
same problems, in what it is hoped is a more convenient and somewhat
more exact terminology, even though on that account it may seem
pedantic. TTiis is true even where terms are used which are apparently
new or unfamiliar. As compared to the author's essay in Logos, 1 the
terminology has been simplified as far as possible and hence considerably
changed in order to render it more easily understandable. The most
precise formulation cannot always be reconciled with a form which can
readily be popularized. In such cases the latter aim has had to be
sacrificed.

On the concept of "understanding" 2 compare the AUgemeine Psycho-
pathologie of Karl Jaspers, also a few observations by Heinrich Rickert
in the second edition of the Grenzen der naturwissenschaftlichen Be-
griffshildung and particularly some of Simmel's discussions in the
Probleme der Gesckichtsphilosophie. For certain methodological con-
siderations the reader may here be referred, as often before in the
author's writings, to the procedure of Friedrich Gottl in his work Die
Herrsckaft des Wortes; this book, to be sure, is written in a somewhat
difficult style and its argument does not appear everywhere to have been
thoroughly thought through. As regards content, reference may be made

[3]

4 BASIC SOCIOLOGICAL TERMS [ Cfe. I

especially to the fine work of Ferdinand Tonnies, Gemeinsckaft und
Gesellschaft, and also to the gravely misleading book of Rudolf Stamm-
let, Wirtschaft wnd Recht nach der materialistiscken Gesckichtsaufias-
sung, which may be compared with my criticism in the Archiv fur
Sozudwissenschaft (vol. 14, 1907, [GAzW, 291-359]). This critical
essay contains many of the fundamental ideas of the following exposi-
tion. The present work departs from Simmel's method (in his Soziologie
and his Phihsophie des Geldes) in drawing a sharp distinction between
subjectively intended and objectively valid "meanings"; two different
things which Simmel not only fails to distinguish but often deliberately
treats as belonging together.

i . The Definition of Sociology and of Social Action

Sociology (in the sense in which this-highly ambiguous word is used
here) is a science concerning itself with the interpretive understanding
of social action and thereby with a causal explanation of its course and
consequences. We shall speak of "action" insofar as the acting individual
attaches a subjective meaning to his behavior — be it overt or covert,
omission or acquiescence. Action is "sociaTinsoiar as its subjective mean-
ing takes account of the behavior of others and is thereby oriented in its
course. 3

A. METHODOLOGICAL FOUNDATIONS*

i . "Meaning" may be of two kinds. The term may refer first to the
actual existing meaning in the given concrete case of a particular actor,
or to the average or approximate meaning attributable to a given plurality
of actors; or secondly to the theoretically conceived pure type* of subjec-
tive meaning attributed to the hypothetical actor or actors in a given
type of action. In no case does it refer to an objectively "correct" mean-
ing or one which is "true" in some metaphysical sense. It is this which
distinguishes the empirical sciences of action, such as sociology and
history, from the dogmatic disciplines in that area, such as jurisprudence,
logic, ethics, and esthetics, which seek to ascertain the "true" and "valid"
meanings associated with the objects of their investigation.

2. The line between meaningful action and merely reactive behavior
to which no subjective meaning is attached, cannot be sharply drawn
empirically. A very considerable part of all sociologically relevant be-
havior, especially purely traditional behavior, is marginal between the

i ] Definitions of Sociology and of Social Action 5

two. In the case of some psychophysical processes, meaningful, i.e., sub-
jectively understandable, action is not to be found at all; in others it is
discernible only by the psychologist. Many mystical experiences which
cannot be adequately communicated in words are, for a person who is
not susceptible to such experiences, not fully understandable. At the
same time the ability to perform a similar action is not a necessary pre-
requisite to- understanding; "one need not have been Caesar in order to
' understand Caesar." "Recapturing an experience" is important for ac-
curate understanding, but not an absolute precondition for its interpreta-
tion. Understandable and non-understandable components of a process
aje often intermingled and bound up together.

3. All interpretation of meaning, like all scientific observations,
strives for clarity and verifiable accuracy of insight and comprehension
(EvicUnz).* The basis for certainty in understanding can be either
rational, which can be further subdivided into logical and mathematical,
or it can be of an emotionally empathic or artistically appreciative qual-
ity. Action is rationally evident chiefly when we attain a completely clear
'intellectual grasp of the action-elements in their intended context of
meaning. Empathic or appreciative accuracy is attained when, through
sympathetic participation, we can adequately grasp the emotional context
in which the action took place. The highest degree of rational under-
standing is attained in cases involving the meanings of logically or
maEhematically related propositions; their meaning may be immediately
and unambiguously intelligible. We have a perfectly clear understanding
of what it means when somebody employs the proposition 2. X 2 = 4 or
the Pythagorean theorem in reasoning or argument, or when someone
correctly carries out a logical train of reasoning according to our accepted
modes of thinking. In the same way we also understand, what a person
is doing when he tries to achieve certain ends by choosing appropriate
means on the basis of the facts of the situation, as experience has accus-
tomed us to interpret them. The interpretation of such rationally pur-
poseful action possesses, for the understanding of the choice of means,
the highest degree of verifiable certainty. With a lower degree of
certainty, which is, however, adequate for most purposes of explanation,
we are able to understand errors, including confusion of problems of the
sort that we ourselves are liable to, or the origin of which we can detect
by sympathetic self-analysis.

On the other hand, many ultimate ends or values toward which
experience shows that human action may be oriented, often cannot be
understood completely, though sometimes we are able to grasp them
intellectually. The more radically they differ from our own ultimate
values, however, the more difficult it is for us to understand them em-

6 BASIC SOCIOLOGICAL TERMS [ Ch. I

pathically. Depending upon the circumstances of the particular case we
must be content either with a purely intellectual understanding of such
values or when even that fails, sometimes we must simply accept them
as given data. Then we can try to understand the action motivated by
them on the basis of whatever opportunities for approximate emotional
and intellectual interpretation seem to be available at different points in
its course. These difficulties confront, for instance, people not susceptible
to unusual acts of religious and charitable zeal, or persons who abhor
extreme rationalist fanaticism (such as the fanatic advocacy of the
"rights of man").

The more we ourselves are susceptible to such emotional reactions as
anxiety, anger, ambition, envy, jealousy, love, enthusiasm, pride, venge-
fulness, loyalty, devotion, and- appetites of all sorts, and to the "irrational"
conduct which grows out of them, the more readily can we empathize
with them. Even when such emotions are found in a degree of intensity
of which the observer himself is completely incapable, he can still have
a significant degree of emotional understanding of their meaning and
can interpret intellectually their influence on the course of action and the
selection of means.

For the purposes of a typological scientific analysis it is convenient to
treat all irrational, effectually determined elements of behavior as factors
of deviation from a conceptually pure type of rational action. For ex-
ample a panic on the stock exchange can be most conveniently analysed
by attempting to determine first what the course of action would have
been if it had not been influenced by irrational affects; it is then possible
to introduce the irrational components as accounting for the observed
deviations from this hypothetical course. Similarly, in analysing a polit-
ical or military campaign it is convenient to determine in the first place
what would have been a rational course, given the ends of the partici-
pants and adequate knowledge of all the circumstances. Only in this
way is it possible to assess the causal significance of irrational factors as
accounting for the deviations from this type. The construction of a
purely rational course of action in such cases serves the sociologist as
a type (ideal type) which has the merit of clear understandability and
lack of ambiguity. By comparison with this it is possible to understand
the ways in which actual action is influenced by irrational factors of all
sorts, such as affects and errors, in that they account for the deviation
from the line of conduct which would be expected on the hypothesis
that the action were purely rational.

Only in this respect and for these reasons of methodological conven-
ience is the method of sociology "rationalistic." It is naturally not legiti-
mate to interpret this procedure as involving a rationalistic bias of

i ] Definitions of Sociology and of Social Action . 7

sociology, but only as a methodological device. It certainly does not in-
volve a belief in the actual predominance of rational elements in human
life, for on the question of how far this predominance does or does not
exist, nothing whatever has been said. That there is, however, a danger
of rationalistic interpretations where they are out of place cannot be
denied. All experience unfortunately confirms the existence of this
danger.

4. In all the sciences of human action, account must be taken of
processes and phenomena which are devoid of subjective meaning, in the
role of stimuli, results, favoring or hindering circumstances. To be
devoid of meaning is not identical with being lifeless or non-human;
every artifact, such as for example a machine, can be understood only
in terms of the meaning which its production and use have had or were
intended to have; a meaning which may derive from a relation to exceed-
ingly various purposes. Without reference to this meaning such an
object remains wholly unintelligible. That which is intelligible or under-
standable about it is thus its relation to human action in the role either
'of means or of end; a relation of which the actor or actors can be said to
have been aware and to which their action has been oriented. Only in
terms of such categories isit possible to "understand" objects of this kind.
On the other hand processes or conditions, whether they are animate or
inanimate, human or non-human, are in the present sense devoid of
meaning in so far as they cannot be related to an intended purpose. That
is to say they are devoid of meaning if they cannot be related to action
in the role of means or ends but constitute only the stimulus, the favor-
ing or hindering circumstances. It may be that the flooding of the
DoIIart [at the mouth of the Ems river near the Dutch-German border]
in 1277 had historical significance as a stimulus to the beginning of
certain migrations of considerable importance. Human mortality, indeed
the organic life cycle from the helplessness of infancy to that of old age,
is naturally of the very greatest sociological importance through the
various ways in which human action has been oriented to these facts.
To still another category of facts devoid of meaning, belong certain
psychic or psychophysical phenomena such as fatigue, habituation,
memory, etc.; also certain typical states of euphoria under some condi-
tions of ascetic mortification; finally, typical variations in the reactions of
individuals according to reaction-time, precision, and other modes. But
in the last analysis the same principle applies to these as to other
phenomena which are devoid of meaning. Both the actor and the soci-
ologist must accept them as data to be taken into account.

It is possible that future research may be able to discover non-
interpretable uniformities underlying what has appeared to be specif-

8 BASIC SOCIOLOGICAL TERMS [Ch. 1

ically meaningful action, though little has been accomplished in this
direction thus far. Thus, for example, differences in hereditary biological
constitution, as of "races," would have to be treated by sociology as given
data in the same way as the physiological facts of the need of nutrition
or the effect of senescence on action. This would be the case if, and in-
sofar as, we had statistically conclusive proof of their influence on socio-
logically relevant behavior. The recognition of the causal significance
of such factors would not in the least alter the specific task of sociological
analysis or of that of the other sciences of action, which is the interpreta-
tion of action in terms of its subjective meaning. The effect would be
orly to introduce certain non-interpretable data of the same order as
others which are already present, into the complex of subjectively under-
standable motivation at certain points. (Thus it may come to be known
that there are typical relations between the frequency of certain types of
teleological orientation of action or of the degree of certain kinds of
rationality and the cephalic index or skin color or any other biologically
inherited characteristic.)

5. Understanding may be of two kinds: the first is the direct observa-
tional understanding 7 of the subjective meaning of a given act as such,
including verbal utterances. We thus understand by direct observation,
in this case, the meaning of the proposition 2X2 — 4 when we hear
or read it. This is a case of the direct rational understanding of ideas.
We also understand an outbreak of anger as manifested by facial expres-
sion, exclamations or irrational movements. This is direct observational
understanding of irrational emotional reactions. We can understand in
a similar observational way the action of a woodcutter or of somebody
who reaches for the knob to shut a door or who aims a gun at an animal.
This is rational observational understanding of actions.

Understanding may, however, be of another sort, namely explanatory
understanding. Thus we understand in terms of motive the meaning an
actor attaches to the proposition twice two equals four, when he states
it or writes it down, in that we understand what makes him do this at
precisely this moment and in these circumstances. Understanding in this
sense is attained if we know that he is engaged in balancing a ledger or
in making a scientific demonstration, or is engaged in some other task
of which this particular act would be an appropriate part. This is ra-
tional understanding of motivation, which consists in placing the act in
an intelligible and more inclusive context of meaning.* Thus we under-
stand the chopping of wood or aiming of a gun in terms of motive in
addition {o direct observation if we know that the woodchopper is work-
ing for a "Wage or is chopping a supply of firewood for his own use or
possibly is doing it for recreation. But he might also be working off a

i ] _ Definitions of Sociology and of Social Action 9

fit of rage, an irrational case. Similarly we understand the motive of a
person aiming a gun if we know that he has been commanded to shoot
as a member of a firing squad, that he is fighting against an enemy, or
that he is doing it for revenge. The last is affectually determined and
thus in a certain sense irrational. Finally we have a motivational under-
standing of the outburst of anger if we know that it has been provoked
by jealousy, injured pride, or an insult. The last examples are all affec-
tually determined and hence derived from irrational motives. In all the
above cases the particular act has been placed in an understandable
sequence of motivation, the understanding of which can be treated as an
explanation of the actual course of behavior. Thus for a science which
is concerned with the subjective meaning of action, explanation requires
a grasp of the complex of meaning in which an actual course of under-
standable action thus interpreted belongs, In all such cases, even where
the processes are largely affectual, the subjective meaning of the action,
including that also of the relevant meaning complexes, will be called the
'intended meaning. 6 (This involves a departure from ordinary usage,
which speaks of intention in this sense only in the case of rationally pur-
posive action.)

6. In all these cases understanding involves the interpretive grasp of
the meaning present in one of the following contexts: (a) as in the his-
toricaj approach, the actually intended meaning for concrete individual
action; or (b) as in cases of sociological mass phenomena, the average of,
or an approximation to, the actually intended meaning; or (c) the mean-
ing appropriate to a scientifically formulated pure type Can ideal type)
of a common phenomenon. The concepts and "laws" of pure economic
theory are examples of this kind of ideal type. They state what course a
given type of human action would take if it were strictly rational, un-
affected by errors r>r emotional factors and if, furthermore, it were com-
pletely and unequivocally directed to a single end, the maximization of
economic advantage. In reality, action takes exactly this course only in
unusual cases, as sometimes on the stock exchange; and even then there
is usually only an approximation to the ideal type. (On the purpose of
such constructions, see my essay in AfS, 19 [cf. n, 5] and point 1 1 below.)

Every interpretation attempts to attain clarity and certainty, but no
matter how clear an interpretation as such appears to be from the point
of view of meaning, it cannot on this account claim to he the causally
valid interpretation. On this level it must remain only a peculiarly
plausible hypothesis. In the first place the "conscious motives" may well,
even to the actor himself, conceal the various "motives" and "repressions"
which constitute the real driving force of his action. Thus in such cases
even subjectively honest self-analysis has only a relative value. Then it

I O BASIC SOCIOLOGICAL TERMS [ Ch. I

is the task of the sociologist to be aware of this motivational situation
and to describe and analyse it, even though it has not actually been con-
cretely part of the conscious intention of the actor; possibly not at all,
at least not fully. This is a borderline case of the interpretation of mean-
ing. Secondly, processes of action which seem to an observer to be the
same or similar may fit into exceedingly various complexes of motive in
the case of the actual actor. Then even though the situations appear
superficially to be very similar we must actually understand them or
interpret them as very different, perhaps, in terms of meaning, direcdy
opposed. (Simmel, in his Probleme der Geschichtsphilosaphie, gives a
number of examples.) Third, the actors in any given situation are often
subject to opposing and conflicting impulses, all of which we are able to
understand. In a large number of cases we know from experience it is
not, possible to arrive at even an approximate estimate of tne relative
strength of conflicting motives and very often we cannot be certain of
our interpretation. Only the actual outcome of the conflict gives a solid
basis of judgment.

More generally, verification of subjective interpretation by compari-
son with the concrete course of events is, as in the case of all hypotheses,
indispensable. Unfortunately this type of verification is feasible with
relative accuracy only in the few very special cases susceptible of
psychological experimentation. In very different degrees of approximation,
such verification is also feasible in the limited number of cases of mass
phenomena which can be statistically described and unambiguously
interpreted. For the rest there remains only the possibility of comparing
the largest possible number of historical or contemporary processes
which, while otherwise similar, -differ in the one decisive point of their
relation to the particular motive or factor the role of which is being
investigated. This is a fundamental task of comparative sociology.
Often, unfortunately, there is available only the uncertain procedure
of the "imaginary experiment" which consists in thinking away certain
elements of a chain of motivation and working out the course of action
which would then probably ensue, thus arriving at a causal judgment."

For example, the generalization called Gresham's Law is a rationally
clear interpretation of human action under certain conditions and under
the assumption that it will follow a purely rational course. How far any
actual course of action corresponds to this can be verified only by the
available statistical evidence for the actual disappearance of under-valued
monetary units from circulation. In this case our information serves to
demonstrate a high degree of accuracy. The facts of experience were
known before the generalization, which was formulated afterwards;
but without this successful interpretation our need for causal understand-

i ] Definitions of Sociology and of Social Action i i

ing would evidently be left unsatisfied. On the other hand, without the
demonstration that what can here be assumed to be a theoretically ade-
quate interpretation also is in some degree relevant to an actual course
of action, a "law," no matter how fully demonstrated theoretically, would
be worthless for the understanding of action in the rea* world. In this
case the correspondence between the theoretical interpretation of motiva-
tion and its empirical verification is entirely satisfactory and the cases are
numerous enough so that verification can be considered established. But
to take another example, Eduard Meyer has advanced an ingenious
theory of the causal significance of the batdes of Marathon, Salamis, and
Platea for the development of the cultural peculiarities of Greek, and
hence, more generally, Western, civilization." This is derived from a
meaningful interpretation of certain symptomatic facts having to do
with the attitudes of the Greek oracles and prophets towards the Per-
sians. It can only be direcdy verified by reference to the examples of the
conduct of the Persians in cases where they were victorious, as in
Jerusalem, Egypt, and Asia Minor, and even this verification must neces-
^sarily remain unsatisfactory in certain respects. The striking rational
plausibility of the hypothesis must here necessarily be relied on as a sup-
port. In very many cases of historical interpretation which seem highly
plausible, however, there is not even a possibility of the order of verifica-
tion which was feasible in this case. Where this is true the interpretation
must necessarily remain a hypothesis.

7. A motive is a complex of subjective meaning which seems to the
actor himself or to the observer an adequate ground for the conduct in
question. The interpretation of a coherent course of- conduct is "sub-
jectively adequate" (or "adequate on the level of meaning"), insofar as,
according to our habitual modes of thought and feeling, its component
parts taken in their mutual relation are recognized to constitute a
"typical" complex of meaning." It is more common to say "correct." The
interpretation of a sequence of events will on the other hand be called
causally adequate insofar as, according to established generalizations
from experience, there is a probability that it will always actually occur
in the same way. An example of adequacy on the level of meaning
in this sense is what is, according to our current norms of calculation or
thinking, the correct solution of an arithmetical problem. On the other
hand, a causally adequate interpretation of the same phenomenon would
concern the statistical probability that, according to verified generaliza-
tions from experience, there would be a correct or an erroneous solution
of the same problem. This also refers to currendy accepted norms but
includes taking account of typical errors or of typical confusions. Thus
causal explanation depends on being able to determine that there is a

I 2 BASIC SOCIOLOGICAL TERMS [ Ck. 1

probability, which in the rare ideal case can be numerically stated, but is
always in some sense calculable, that a given observable event (overt or
subjective) will be followed or accompanied by another event.

A correct causal interpretation of a concrete course of action is arrived
at when the overt action and the motives have both been correctly appre-
hended and at the same time their relation has become meaningfully
comprehensible. A correct causal interpretation of typical action means
that the process which is claimed to be typical is shown to be both ade-
quately grasped on the level of meaning and at the same time the inter-
pretation is to some degree causally adequate- If adequacy in respect to
meaning is lacking, then no matter how high the degree of uniformity
and how precisely its probability can be numerically determined, it is
still an incomprehensible statistical probability, whether we deal with
overt or subjective processes. On the other hand, even the most perfect
adequacy on the level of meaning has causal significance from a socio-
logical point of view only insofar as there is some kind of proof for the
existence of a probability" that action in fact normally takes the course
which has been held to be meaningful. For this there must be some
degree of determinable frequency of approximation to an average or a
pure type.

Statistical uniformities constitute understandable types of action, and
thus constitute sociological generalizations, only when they can be
regarded as manifestations of the understandable subjective meaning of
a course of social action. Conversely, formulations of a rational course
of subjectively understandable action constitute sociological types of
empirical process only when they can be empirically observed with a,
significant degree of approximation. By no means is the actual likelihood
of the occurrence of a given course of overt action always direcdy pro-
portional to the clarity of subjective interpretation. Only actual experi-
ence can prove whether this is so in a given case. There are statistics of
processes devoid of subjective meaning, such as death rates, phenomena
of fatigue, the production rate of machines, the amount of rainfall, in
exacdy the same sense as there are statistics of meaningful phenomena.
But only when the phenomena are meaningful do we speak of socio-
logical statistics. Examples are such cases as crime rates, occupational
distributions, price statistics, and statistics of crop acreage. Naturally
there are many cases where both components are involved, as in crop
statistics.

8. Processes and uniformities which it has here seemed convenient
not to designate as sociological phenomena or uniformities because they
are not "understandable," are naturally not on that account any the less
important. This is true even for sociology in our sense which is restricted

r ] _ Definitions of Sociology and of Social Action i 3

to subjectively understandable phenomena — a usage which there is no
intention of attempting to impose on anyone else. Such phenomena,
however important, are simply treated by a different method from the
others; they become conditions, stimuli, furthering or hindering circum-
stances of action.

9. Action in the sense of subjectively understandable orientation of
behavior exists only as the behavior of one or more individual human
beings. For other cognitive purposes it may be useful or necessary to
consider the individual, for instance, as a collection of cells, as a complex
of bio-chemical reactions, or to conceive his psychic life as made up of
a variety of different elements, however these may be defined. Undoubt-
edly such procedures yield valuable knowledge of causal relationships.
But the behavior of these elements, as expressed in such uniformities,
is not subjectively understandable. This is true even of psychic elements
because the more precisely they are formulated from a point of view of
natural science, the less they are accessible to subjective understanding.
This is never the road to interpretation in terms of subjective meaning.
On the contrary, both for sociology in the present sense, and for history,
the object of cognition is the subjective meaning-complex of action. The
behavior of physiological entities such as cells, or of any sort of psychic
elements, may at least in principle be observed and an attempt made to
derive uniformities from such observations. It is further possible to
attempt, with their help, to obtain a causal explanation of individual phe-
nomena, that is, to subsume them under uniformities. But the subjective
understanding of action takes the same account of this type of fact and
uniformity as of any others not capable of subjective interpretation.
(This is true, for example, of physical, astronomical, geological, meteor-
ological, geographical, botanical, zoological, and anatomical Facts, of those
aspects of psycho-pathology which are devoid of subjective meaning, or
of the natural conditions of technological processes.)

For still other cognitive purposes — for instance, juristic ones — or for
' practical ends, it may on the other hand be convenient or even indispensa-
ble to treat social collectivities, such as states, associations, business corpora-
tions, foundations, as if they were individual persons. Thus they may be
treated as the subjects of rights and duties or as the performers of legally
significant actions. But for the subjective interpretation of action in socio-
logical work these collectivities must be treated as solely the resultants
and modes of organization of the particular acts of individual persons,
since these alone can be treated as agents in a course of subjectively
understandable action. Nevertheless, the sociologist cannot for his pur-
poses afford to ignore these collective concepts derived from other
disciplines. For the subjective interpretation of action has at least three

I 4 BASIC SOCIOLOGICAL TERMS [ Cfc. I

important relations to these concepts. In the first place it is often neces-
sary to employ very similar collective concepts, indeed often using the
same terms, in order to obtain an intelligible terminology. Thus both in
legal terminology and in everyday speech the term "state" is used both
for the legal concept of the state and for the phenomena of social action
to which its legal rules are relevant. For sociological purposes, however,
d.e phenomenon "the sate" does not consist necessarily or even primarily
of the elements which axe relevant to legal analysis; and for sociological
purposes there is no such thing as a collective personality which "acts."
When reference is made in a sociological context to a state, a nation, a
corporation, a family, or an army corps, or to similar collectivities,
what is meant is, on the contrary, only a certain kind of development of
actual or possible social actions of individual persons. Both because of its
precision and because it is established in general usage the juristic con-
cept is taken over, but is used in an entirely different meaning.

Secondly, the subjective interpretation of action must take account
of a fundamentally important fact. These concepts of collective entities
which are found both in common sense and in juristic and other tech-
nical forms of thought, have a meaning in the minds of individual per-
sons, partly as of something actually existing, partly as something with
normative authority. This is true not only of judges and officials, but of
ordinary private individuals as well. Actors thus in part orient their
action to them, and in this role such ideas have a powerful, often a
decisive, causal influence on the course of action of real individuals. This
is above all true where the ideas involve normative prescription or pro-
hibition. Thus, for instance, one of the important aspects, of the exist-
ence of a modem state, precisely as a complex of* serial interaction of
individual persons, consists in the fact that the action of various indi-
viduals is oriented to the belief that it exists or should existj thus that
its acts and laws are valid in the legal sense. This will be further dis-
cussed below. Though extremely pedantic and cumbersome, it would be
possible, if purposes of sociological terminology alone were involved, to
.eliminate such terms entirely, and substitute newly-coined words. This
would be possible even though the word "state" is used ordinarily not
only to designate the legal concept but also the real process of action.
But in the above important connexion, at least, this would naturally be
impossible.

Thirdly, it is the method of the so-called "organic" school of sociology
— classical example: SchaffVs brilliant work, Bau und Leben des
soztalen Korpers — to attempt to understand social interaction by using as
a point of departure the "whole" within which the individual acts. His
action and behavior are then interpreted somewhat in the way that a

i ] _ Definitions of Sociology and of Social Action i 5

physiologist would treat the role of an organ of the body in the "economy"
of the organism, that is from the point of view of the survival of the
latter. (Compare the famous dictum of a well-known physiologist: "Sec.
10. The spleen. Of the spleen, gendemen, we know nothing. So much
for the spleen." Actually, of course, he knew a good deal about the
spleen — its position, size, shape, etc.; but he could say nothing about its
function, and it was his inability to do this that he called "ignorance.")
How far in other disciplines this type of functional analysis of the rela-
tion of "parts" to a "whole" can be regarded as definitive, cannot be dis-
cussed here; but it is well known that the bio-chemical and bio-physical
modes of analysis of the organism are on principle opposed to stopping
there. For purposes of sociological analysis two things can be said. First
this functional frame of reference is convenient for purposes of practical
illustration and for provisional orientation. In these respects, it is not
only useful but indispensable. But at the same time if its cognitive value
is overestimated and its concepts illegitimately "reified," 14 it can be highly
^dangerous. Secondly, in certain circumstances this is the only available
way of determining just what processes of social action it is important to
understand in order to explain a given phenomenon. But this is only the
beginning of sociological analysis as here understood. In the case of
social collectivities, precisely as distinguished from organisms, we are in
a position to go beyond merely demonstrating functional relationships
and uniformities. We can accomplish something which is never attain-
able in the natural sciences, namely the subjective understanding of the
action of the component individuals. The natural sciences on the other
hand cannot do this, being limited to the formulation of causal uni-
formities in objects and events and the explanation of individual facts
by applying them. We do not "understand" the behavior of cells, but can
only observe the relevant functional relationships and generalize on the
basis of these observations. This additional achievement of explanation
by interpretive understanding, as distinguished from external observa-
tion, is of course attained only at a price — the more hypothetical and
fragmentary character of its results. Nevertheless, subjective understand-
ing is the specific characteristic of sociological knowledge.

It would lead too far afield even to attempt to discuss how far the
behavior of animals is subjectively understandable to us and vice veisa;
in both cases the meaning of the term understanding and its extent of
application would be highly problematical. But in so far as such under-
standing existed it would be theoretically possible to formulate a sociol-
ogy of the relations of men to animals, both domestic and wild. Thus
many animals "understand" commands, anger, love, hostility, and react to
them in ways which are evidently often by no means purely instinctive

I 6 BASIC SOCIOLOGICAL TERMS [ Ck. I

and mechanical and in some sense both consciously meaningful and
affected by experience. In a way, our ability to share the feelings of
primitive men is not very much greater. We either do not have any
reliable means of determining the subjective state of mind of an animal
or what we have is at best very unsatisfactory. It is well known that the
problems of animal psychology, however interesting, are very thorny
ones. There are in particular various forms of social organization among
animals: monogamous and polygamous "families/' herds, Hocks, and
finally "states," with a functional division of labour. (The extent of func-
tional differentiation found in these animal societies is by no means,
however, entirely a matter of the degree of organic or morphological
differentiation of the individual members of the species. Thus, the func-
tional differentiation found among the termites, and in consequence that
of the products of their social activities, is much more advanced than in
the case of the bees and ants.) In this field it goes without saying that a
purely functional point of view is often the best that can, at least for the
present, be attained, and the investigator must be content with it Thus
it is possible to study the ways in which the species provides for its
survival; that is, for nutrition, defence, reproduction, and reconstruction
of the social units. As the principal bearers of these functions, differenti-
ated types of individuals can be identified: "kings," "queens," "workers,"
"soldiers," "drones," "propagators," "queen's substitutes," and so on. Any-
thing more than that was for a long time merely a matter of speculation
or of an attempt to determine the extent to which* heredity on the one
hand and environment on the other would be involved in the develop-,
ment of these "social" proclivities. This was particularly true of the con-
troversies between Gotte and Weismann. 1 * The latter's conception in Die
AUmacht der Natwztichtung was largely based on wholly non-empirical
deductions. But all serious authorities are naturally fully agreed that the
limitation of analysis to the functional level is only a necessity imposed
by our present ignorance, which it is hoped will only be temporary. (For
an account of the state of knowledge of the termites, for example, see
the study by Karl Escherich, Die Termiten oder weissen Ameisen,
1909.)
' \ The researchers would like to understand not only the relatively
obvious survival functions of these various differentiated types, but also
the bearing of different variants of the theory of heredity or its reverse
On the problem of explaining how these differentiations have come
about. Moreover, they would like to know first what factors account for
the original differentiation of specialized types from the still neutral
undifferentiated species-type. Secondly, it would be important to know
what leads the differentiated individual in the typical case to behave

i ] Definitions of Sociology and of Social Action I 7

in a way^which actually serves the survival value of the organized group.
Wherever research has made any progress in the solution of these prob-
lems it has been through the experimental demonstration of the prob-
ability or possibility of the role of chemical stimuli or physiological
processes, such as nutritional states, the effects of parasitic castration,
etc., in the case of the individual organism. How far there is even a
hope that the existence of "subjective" or "meaningful" orienntion could
be made experimentally probable, even the specialist today would hardly
be in a position to say. A verifiable conception of the state of mind of
these social animals accessible to meaningful understanding, would seem
to be attainable even as an ideal goal only within narrow limits. How-
ever that may be, a contribution to the understanding of human social
action is hardly to be expected from this quarter. On the contrary, in the
field of animal psychology, human analogies are and must be continually
employed. The most that can he hoped for is, then, that these biological
analogies may some day be useful in suggesting significant problems.
For instance they may throw light on the question of the relative role in
,the early stages of human social differentiation of mechanical and in-
stinctive factors, as compared with that of the factors which are accessible
to subjective interpretation generally, and more particularly to the role
of consciously rational action. It is necessary for the sociologist to be
thoroughly aware of the fact that in the early stages even of human
development, the first set of factors is completely predominant. Even in
the later stages he must take account of their continual interaction with
the others in a role which is often of decisive importance. This is par-
ticularly true of all "traditional" action and of many aspects of charisma,
which contain the seeds of certain types of psychic "contagion" and thus
give rise to new social developments. These types of action are very
closely related to phenomena which are understandable either only
in biological terms or can be interpreted in terms of subjective motives
only in fragments. But all these facts do not discharge sociology from the
obligation, in full awareness of the narrow limits to which it is confined,
to accomplish what it alone can do.

The various works of Othmar Spann [1878-1950] are often full of
suggestive ideas though at the same time he is guilty of occasional mis-
understandings and above all of arguing on the basis of pure value
judgments which have no place in an empirical investigation. But he is
undoubtedly correct in doing something to which, however, no one seri-
ously objects, namely, emphasizing the sociological significance of the
functional point of view for preliminary orientation to problems. This is
what he calls the "universalistic method." It is true that we must know
what kind of action is functionally necessary for "survival," but even

i 8 BASIC SOCIOLOGICAL TERMS _ [ Ch. 1

more so for the maintenance of a cultural type and the continuity of the
corresponding modes of social action, before it is possible even to inquire
how this aaio.i has come about and what motives determine it. It is
necessary to know what a "king," an "official," an "entrepreneur," a
"procurer," or a "magician" does, that is, what kind of typical action, which
justifies classifying an individual in one of these" categories, is important
and relevant for an analysis, before it is possible to undertake the analysis
itself. (This is what Rickert means by Wertbezogenheit.*) But it is only
this analysis itself which can achieve the sociological understanding of
the actions of typically differentiated human (and only human) indi-
viduals, and which hence constitutes the specific function of sociology.
It is a tremendous misunderstanding to think that an "individualistic"
method should involve what is in any conceivable sense an individualistic
system of values. It is as important to avoid this error as the related one
which confuses the unavoidable tendency of sociological concepts to as-
sume a rationalistic character with a belief in the predominance of
rational motives, or even a positive valuation of rationalism. Even a
socialistic economy would have to be understood sociologically in exacdy
the same kind of "individualistic" terms; that is, in terms of the action
of individuals, the types of officials found in it, as would be the case
with a system of free exchange analysed in terms of the theory of mar-
ginal utility or a "better," but in this respect similar theory). The real
empirical sociological investigation begins with the question: What
motives determine and lead the individual members and participants in
this socialistic community to behave in such a way that the community
came into being in the first place and that it continues to exist? Any '
form of functional analysis which proceeds from the whole to the parts
can accomplish only a preliminary preparation for this investigation —
a preparation, the utility and indispensability of which, if properly car-
ried out, is naturally beyond question.

10. It is customary to designate various sociological generalizations,
as for example "Gresham's Law," as "laws." These are in fact typical
probabilities confirmed by observation to the effect that under certain
given conditions an expected course of social action will occur, which is
understandable in terms of the typical motiyes and typical subjective
intentions of the actors. These generalizations are both understandable
and definite in the highest degree insofar as the typically observed course
of action can be Understood in terms of the purely rational pursuit of
an end, or where for reasons of methodological convenience such a
theoretical type can be heuristically employed. In surh cases the relations
of means and end will be clearly understandable on grounds of experi-
ence, particularly where the choice of means was "inevitable." In such

i ] _ Definitions of Sociology and of Social Action i 9

cases it is legitimate to assert that insofar as the action was rigorously
rational it could not have taken any other course because for technical
reasons, given their clearly defined ends, no other means were available
to the actors. This very case demonstrates how erroneous it is to regard
any kind of psychology as the ultimate foundation of the sociological
interpretation of action. The term psychology, to be sure, is today
understood in a wide variety of senses. For certain cjuite specific method-
ological purposes the type of treatment which attempts to follow the
procedures of the natural sciences employs a distinction between
"physical" and "psychic" phenomena which is entirely foreign to the
disciplines concerned with human action, at least in the present sense.
The results of a type of psychological investigation which employs the
methods of the natural sciences in any one of various possible ways may
naturally, like the results of any other science, have outstanding signif-
icance for sociological problems; indeed this has often happened. But
this use of the results of psychology is something quite different from
*the investigation of human behavior in terms of its subjective meaning.
Hence sociology has no closer relationship on a general analytical level
to this type of psychology than to any other science. The source of error
lies in the concept of the "psychic." It is held that everything which is
not physical is ipso facto psychic. However, the meaning of a train of
mathematical reasoning which a person carries out is not in the relevant
sense "psychic." Similarly the rational deliberation of an actor as to
whether the results of a given proposed course of action will or will not
proinota certain specific interests, and the corresponding decision, do
not become one bit more understandable by taking "psychological" con-
siderations into account. But it is Jfrecisely on the basis of such rational
assumptions that most of the taws of sociology, including those of eco-
nomics, are built up. On the other hand, in explaining the irrationalities
of action sociologically, that form of psychology which employs the
method of subjective understanding undoubtedly can make decisively
important contributions. But this does not alter the fundamental . ierf]-
odological situation,

1 r. We have taken for granted that sociology seeks to formulate type
concepts and generalized uniformities of empirical process. This dis-
tinguishes it from history/which is oriented to the causal analysis and
explanation of individual actions, structures, and personalities possessing
cultural significance. The empirical material which underlies the con-
cepts of sociology consists to a very large extent, though by no means
exclusively, of the same concrete processes of action which are dealt witjb
by historians. An important consideration in the formulation of soci-
ological concepts and generalizations is the contribution that sociology

2 BASIC SOCIOLOGICAL TERMS [Ch. I

can make toward the causal explanation of some historically and cul-
turally important phenomenon. As in the case of every generalizing
science the abstract character of the concepts of sociology is responsible
for the fact that, compared with actual historical reality, they are rela-
tively lacking in fullness of concrete content. To compensate for this
disadvantage, sociological analysis can offer a greater precision of con-
cepts. This precision is obtained by striving for the highest possible
degree of adequacy on the level of meaning. It has already been re-
peatedly stressed that this aim can be realized in a particularly high
degree in the case of concepts and generalizations which formulate
rational processes. But sociological investigation attempts to include in
its scope various irrational phenomena, such as prophetic, mystic, and
affectual modes of action, formulated in terms of theoretical concepts
which are adequate on the level of meaning. In all cases, rational or
.irrational, sociological analysis both abstracts from reality and at the
same time helps us to understand it, in that it shows with what degree of
approximation a concrete historical phenomenon can be subsumed under
one or more of these concepts. For example, the same historical phenome-
non may be in one aspect feudal, in another patrimonial, in another
bureaucratic, and in still another charismatic. In order to give a pre-
cise meaning to these terms, it is necessary for the sociologist to formulate
pure ideal types of the corresponding forms of action which in each case
involve the highest possible degree of logical integration by virtue of
their complete adequacy on the level of meaning. But precisely because
this is true, it is probably seldom if ever that a real phenomenon can be
found which corresponds exactly to one of these ideally constructed pure
types. The case is similar to a physical reaction which has been cal-
culated on the assumption of an absolute vacuum. Theoretical differ-
entiation (Ka$: isHk) is possible in sociology only in terms of ideal or
pure types. It goes ithout saying that in addition it is convenient for
the sociologist from time to time to employ average types of an em-
pirical statistical character, concepts which do not require methodological
discussion. But when reference is made to "typical" cases, the term should
always be understood, unless otherwise stated, as meaning ideal types,
which may in turn be: rational or irrational as the case may be (thus
in economic theory they are always rational), but in any case are always
constructed with a view to adequacy on the level of meaning.

It is important to realize that in the sociological field as elsewhere,
averages, and hence average types, can be formulated with a relative
degree of precision only when* (hey are concerned with differences of
degree in respect to action which remains qualitatively the same. Such
cases do occur, but in the majority of cases of action important to. history

i ] - Definitions of Sociology and of Social Action 2 1

or sociology the motives which determine it are qualitatively heterogene-
ous. Then it is quite impossible to speak of an "average" in the true sense.
The ideal types of social action which for instance are used in economic
theory are thus unrealistic or abstract in that they always ask what course
of action would take place if it were purely rational and oriented to
economic ends alone. This construction can be used to aid in the under-
standing of action not purely economically determined but which in-
volves deviations arising from traditional restraints, affects, errors, and
the intrusion of other than economic purposes or considerations. This
can take place in two ways. First, in analysing the extent to which in the
concrete case, or on the average for a class of cases, the action was in
part economically determined along with the other factors. Secondly, by
throwing the discrepancy between the actual course of events and the
ideal type into relief, the analysis of the non-economic motives actually
involved is facilitated. The procedure would be very similar in employ-
ing an ideal type of mystical orientation, with its appropriate attitude of
Indifference to worldly things, as a tool for analysing its consequences
for the actors relation to ordinary life — for instance, to political or eco-
nomic affairs. The more sharply and precisely the ideal type has been
constructed, thus the more abstract and unrealistic in this sense it is, the
better it is able to perform its functions in formulating terminology,
classifications, and hypotheses. In working out a concrete causal explana-
tion of individual events, the procedure of the historian is essentially the
same. Thus in attempting to explain the campaign of 1866, it is in-
dispensable both in the case of Moltke and of Benedek to attempt to
construct imaginatively how each, given fully adequate knowledge both
of his own situation and of that of his opponent, would have acted.
Then it is possible to compare with this the actual course of action and
to arrive at a causal explanation of the observed deviations, which will
he attributed to such factors as misinformation, strategical errors, logical
fallacies, personal temperament, or considerations outside the realm of
strategy. Here, too, an ideal-typical construction of rational action is
actually employed even though it is not made explicit.

The theoretical^ concepts of sociology are ideal types not only from the
objective point of view, but also in their application to subjective proc-
esses. In the great majority of cases actual action goes on in a state of in-
articulate half-consciousness or actual unconsciousness of its subjective
meaning. The actor is more likely to "be aware" of it in a vague sense than
he is to "know" what he is doing or be explicitly self-conscious about it.
In most cases his action is governed by impulse or habit. Only occasion-
ally and, in the uniform action of large numbers, often- only in the case
of a few individuals, is the subjective meaning of the action, whether

2 2 BASIC SOCIOLOGICAL TERMS [ Ck*. I

rational or irrational, brought clearly into consciousness. The ideal type
of meaningful action where the meaning is fully conscious and explicit
is a marginal case. Every sociological or historical investigation, in apply-
ing its analysis to the empirical facts, must take this fact into account.
But the difficulty need not prevent the sociologist from systematizing his
concepts by the classification of possible types of subjective meaning.
That is, he may reason as if action actually proceeded on the basis of
clearly self-conscious meaning. The resulting deviation from the concrete
facts must continually be kept in mind whenever it is a question of this
level of concreteness, and must be carefully studied with reference both
to degree and kind. It is often necessary to choose between terms which
are either clear or unclear. Those which are clear will, to be sure, have
the abstractness of ideal types, but they are none the less preferable for
scientific purposes. (On all these questions see " 'Objectivity' in Social
Science and Social Policy,")

B. SOCIAL ACTION

i. Social action, which includes both failure to act and passive
acquiescence, may be oriented to the past, present, or expected future
behavior of others. Thus it may be motivated by revenge for a past
attack, defence against present, or measures of defence against future
aggression. The "others" may be individual persons, and may be known
to the actor as such, or may constitute an indefinite plurality and may
be entirely Unknown as individuals. (Thus, money is a means of ex-
chanj; ■ which the actor accepts in payment because he orients his action
to the expectation that a large but unknown number of individuals he is
personally unacquainted with will be ready to accept it in exchange on
some ' uture occasion.)

2. Not ew. ' kind of action, even of overt action, is "social" in the
sense of the present discussion. Overt action is non-social if it is oriented
solely to the behavior of inanimate objects. Subjective attitudes constitute
social action only so far as they are oriented to the behavior of others. For
example, religious behavior is not social if it is simply a matter of con-
templation or of solitary prayer. The economic activity of an individual
is social only if it takes account of the behavior of someone else. Thus
very generally it becomes social insofar as the actor assumes that others
will respect his actual control over economic goods. Concretely it is social,
for instance, if in relation to the actors own consumption the future
wants of others are taken into account and this becomes one considera-
tion affecting the actor's own saving. Or, in another connexion, produc-
tion may be oriented to the future wants of other people.

i ]* Definitions of Sociology and of Social Action 2. 3

3. Not every type of contact of human beings has a social character;
this is rather confined to cases where the actor's behavior is meaning-
fully oriented to that of others. For example, a mere collision of two
cyclists may be compared to a natural event. On the other hand, their
attempt to avoid hitting each other, or whatever insults, blows, or friendly
discussion might follow the collision, would constitute "social action.

4. Social action is not identical either with the similar actions of
many persons Or with every action influenced by other persons. Thus,
if at the beginning of a shower a number of people on the street put up
their umbrellas at the same time, this would not ordinarily be a case of
action mutually oriented to that of each other, but rather of all reacting
in the same way to the like need of protection from the rain- It is well
known that the actions of the individual are strongly influenced by
the mere fact that he is a member of a crowd confined within a limited
space. Thus, the subject matter of studies of "crowd psychology," such
as those of Le Bon, will be called "action conditioned by crowds." It is
also possible for large numbers, though dispersed, to be influenced simul-
taneously or successively by a source of influence operating similarly on
all the individuals, as by means of the press. Here also the behavior of
an individual is influenced by his membership in a "mass" and by the
fact that he is aware of being a member. Some types of reaction are only
made possible by the mere fact that the individual acts as part of a
crowd. Others become more difficult under these conditions. Hence it is
possible that a particular event or mode of human behavior can give rise
to the most diverse kinds of feeling — gaiety, anger, enthusiasm, despair,
and passions of all sorts — in a crowd situation which would not occur at
all or not nearly so readily if the individual were alone. But for this to
happen there need not, at least in many cases, be any meaningful rela-
tion between the behavior of the individual and the fact that he is a
member of a crowd. It is not proposed in the present sense to call action
"social" when it is merely a result of the effect on the individual of the
existence of a crowd as such and the action is not oriented to that fact
on the level of meaning. At the same time the borderline is naturally
highly indefinite. In such cases as that of the influence of the demagogue,
there may be a wide variation in the extent to which his mass clientele is
affected by a meaningful reaction to the fact of its large numbers; and
whatever this relation may be, it is open to varying interpretations.

But furthermore, mere "imitation" of the action of others, such as that
on which Tarde has rightly laid emphasis, will not be considered a case
of specifically social action if it is purely reactive so that there is no
meaningful orientation to the actor imitated. The borderline is, however,
so indefinite that it is often hardly possible to discriminate. The mere

2 4 BASIC SOCIOLOGICAL TERMS [ Ch. I

fact that a person is found to employ some apparently useful procedure
which he learned from someone else does not, however, constitute, in the
present sense, social action. Action such as this is not oriented to the
action of the other person, but the actor has, through observing the
other, become acquainted with certain objective facts; and it is these to
which his action is oriented. His action is then causally determined by
the action of others, but not meaningfully. On the other hand, if the
action of others is imitated because it is fashionable or traditional or
exemplary, or lends social distinction, or on similar grounds, it is mean-
ingfully oriented either to the behavior of the source of imitation or of
third persons or of both. There are of course all manner of transitional
cases between the two types of imitation. Both the phenomena discussed
above, the behavior of crowds and imitation, stand on the indefinite
borderline of social action. The same is true, as will often appear, of
traditionalism and charisma. The reason for the indefiniteness of the
line in these and other cases lies in the fact that both the orientation to
the behavior of others and the meaning which can be imputed by the
actor himself, are by no means always capable of clear determination and
are often altogether unconscious and seldom fully self-conscious. Mere
"influence" and meaningful orientation cannot therefore always be clearly
differentiated on the empirical level. But conceptually it is essential to
distinguish them, even though merely reactive imitation may well have
a degree of sociological importance at least equal to that of the type
which can be called social action in the strict sense. Sociology, it goes -
without saying, is by no means confined to the study of social action;
this is only, at least for the kind of sociology being developed here, its
central subject matter, that which may be said to be decisive for its status
as a science. But this does not imply any judgment on the comparative
importance of this and other factors.

2. Types of Social Action

Social action, like all action, may be oriented in four ways. It may be:

(i) instrwnentally rational (zweckrational), that is, determined by
expectations as to the behavior of objects in the environment and of
other human beings; these expectations are used as "conditions" or
"means" for the attainment of the actor's own rationally pursued and
calculated ends;
(2) value-rational QwertrationaV), that is, determined by a conscious

2 ] _ Types of Social Action 2 5

belief in the value for its own sake of some ethical, aesthetic, religious,
or other form of behavior, independently of its prospects of success;

(3) affectual (especially emotional), that is, determined by the actor's
specific affects and feeling states;

(4) traditional, that is, determined by ingrained habituation.

1. Strictly traditional behavior, like the reactive- type of imitation
discussed above, lies very close to the borderline of what can justifiably
be called meaningfully oriented action, and indeed often on the other
side. For it is very often a matter of almost automatic reaction to habit-
ual stimuli whicA guide behavior in a course which has been repeat-
edly followed. The great bulk of all everyday action to which people
have become habitually accustomed approaches this type. Hence, its
place in a systematic classification is not merely that of a limiting case
because, as will be shown later, attachment to habitual forms can be up-
held with varying degrees of self -consciousness and in a variety of
senses. In this case the type may shade over into value rationality
( Wertratiotutlitat) .

■. 1. Purely affectual behavior also stands on the borderline of what
can be considered "meaningfully" oriented, and often it, too, goes over
the line. It may, for instance, consist in an uncontrolled reaction to
some exceptional stimulus. It is a case of sublimation when affectually
determined action occurs in the form of conscious release of emotional
tension. When this happens it is usually well on the road to rationali-
zation in one or the other or both of the above senses.

3. The orientation of value-rational action is distinguished from the
affectual type by its clearly self-conscious formulation of the ultimate
values governing the action and the consistently planned orientation of
its detailed course to these values. At the same time the two types have a '
common element, namely that the meaning of the action does not lie in
the achievement of a result ulterior to it, but in carrying out the speci-
fic type of action for its own sake. Action is affectual if it satisfies a
need for revenge, sensual gratification, devotion, contemplative bliss, or
for working off emotional tensions (irrespective of the level of sublima-
tion).

Examples of pure value-rational orientation would be the actions of
persons who, regardless of possible cost to themselves, act to put into
practice their convictions of what seems to them to be required by duty,
honor, the pursuit of beauty, a religious call, personal loyalty, or the
importance of some "cause" no matter in what it consists. In our termi-
nology, value-rational action always involves "commands" or "demands"
which, in the actor's opinion, are binding on him. It is only in cases
where human action is motivated by the fulfillment of such uncondi-
tional demands that it will be called value-rational. This is the case in
widely varying degrees, but for the most part only to a relatively slight
extent Nevertheless, it will be shown that the occurrence of this mode
of action is important enough to justify its formulation as a distinct type;

2 6 ^ASIC SOCIOLOGICAL TERMS [ Ck, I

though it may be remarked that there is no intention here of attempting
to Formulate in any sense an exhaustive classification of type; of action.

4. Action is instrumen tally rational Czweckrational^ when the end,
the means, and the secondary results are all rationally taken into account
and weighed. This involves rational consideration of alternative means
to the end, of the relations of the end to the secondary consequences,
and finally of the relative importance of different possible ends. Deter-
mination of action either in affectual or in traditional terms is thus
incompatible with this type. Choice between alternative and conflicting
ends and results may well be determined in a value-rational manner.
In that case, action is instrumentally rational only in respect to the
choice of means. On the other hand, the actor may, instead of deciding
between alternative and conflicting ends in terms of a rational orienta-
tion to a system of values, simply take them as given subjective wants
and arrange them in a scale of consciously assessed relative urgency. He
may then orient his action to this scale in such a way that they are
satisfied as far as possible in order of urgency, as formulated in the
principle of "marginal utility." Value-rational action may thus have
various different relations to the instrumentally rational action. From
the latter point of view, however, value-rationality is always irrational.
Indeed, the more the value to which action is oriented is elevated to the
status of an absolute value, the more "irrational" in this sense the corre-
sponding action is. For, the more unconditionally the actor devotes him-
self to this value for its own sake, to pure sentiment or beauty, to abso-
lute goodness or devotion to duty, the less is he influenced by consider-
ations of the consequences of his action. The orientation of action
wholly to the rational achievement of ends without relation to funda-
mental values is, to be sure, essentially only a limiting case.

5, It would he very unusual to find concrete cases of action, espe-
cially of social action, which were oriented only in one or another of
these ways. Furthermore, this classification of the modes of orientation
of action is in no sense meant to exhaust the possibilities of the field,
but only to formulate in conceptually pure form certain sociologically
important types to which actual action is more or less closely approxi-
mated or, in much the more common case, which constitute it.i ele-
ments. The usefulness of the classification for the purposes of this
investigation can only be judged in terms of its results.

3 . The Concept of Social Relationship

The term "social relationship" will be used to denote the behavior of
a plurality of actors insofar as, in its meaningful content, the action of
each takes account of that of the others and is oriented in these terms.
The social relationship thus consists entirely and exclusivejy in the exist-

3 ] The Concept of Social Relationship 2 7

ence of a probability that there will be a meaningful course of social action
— irrespective, for the time being, of the basis for this probability.

1. Thus, as a defining criterion, it is essential that there should be
at least a minimum of mutual orientation of the action of each to that
of the others. Its content may be of the most varied nature: conflict,
hostility, sexual attraction, friendship, loyalty, or economic exchange. It
may involve the fulfillment, the evasion, or the violation of the terms
of an agreement; economic, erotic, or some other form of "competition";
common membership in status, national or class groups (provided it
leads to social action). Hence, the definition does not specify whether
the relation of the actors is co-operative or the opposite.

2. The "meaning" relevant in this context is always a case of the
meaning imputed to the parties in a given concrete case, on the average,
or in a theoretically formulated pure type — it is never a normal ively
"correct" or a metaphysically "true" meaning. Even in cases of such
forms of social organization as a state, church, association, or marriage,
the social relationship consists exclusively in the fact that there has ex-
isted, exists, or will exist a probability of action in some definite way
appropriate to this meaning. It is vital to be continually clear about this

' in order to avoid the "reineation" of these concepts. A "state," for ex-
ample, ceases to exist in a sociologically relevant sense whenever there
is no longer a probability that certain kinds of meaningfully oriented
social action will take place. This probability may be very high or it may
be negligibly low. But in any case it is only in the sense and degree in
which it does exist that the corresponding social relationship exists. It is
impossible to find any other clear meaning for the statement that, for
instance, a given "state" exists or has ceased to exist.

3. The subjective meaning need not necessarily be the same for all
the parties who are mutually oriented in a given social relationship;
there need not in this sense he "reciprocity." "Friendship," "love,"
'loyalty," "fidelity to contracts," "patriotism," on one side, may well be
faced with an entirely different atdtude on the other. In such cases the
parties associate different meanings with their actions, and the social
relationship is insofar objectively "asymmetrical" from the points of view
of the two parties. It may nevertheless be a case of mutual orientation
insofar as, even though partly or wholly erroneously, one party pre-
sumes a particular attitude toward him on the part of the other and
orients his action to this expectation. This can, and usually will, have
consequences for the course of action and the form of the relationship.
A relationship is objectively symmetrical only as, according to the typi-
cal expectations of the parties, the meaning for one party is the same as
that for the other. Thus the actual attitude of a child to its father may be
a least approximately that which the father, in the individual case, on
the average or typically, has come to expect. A social relationship in
which the attitudes are completely and fully corresponding is in reality
a limiting case. But the absence of reciprocity will, for terminological

2 8 BASIC SOCIOLOGICAL TERMS [ Ck. 1

purposes, be held to exclude trie existence of a social relationship only
if it actually results in the absence of a mutual orientation of the action
of the parties. Here as elsewhere all sorts of transitional cases are the
rule rather than the exception.

4. A social relationship can be of a very fleeting character or of
varying degrees of permanence. In the latter case there is a probability
of the repeated recurrence of the behavior which corresponds to its sub-
jective meaning and hence is expected. In order to avoid fallacious im-
pressions, let it be repeated that it is only the existence of the probability
that, corresponding to a given subjective meaning, a certain type of
action will take place which constitutes the "existence" of the social
relationship. Thus that a "friendship" or a "state" exists or has existed
means this and only this: that we, the observers, judge that there is or has ,
been a probability that on the basis of certain kinds of known subjective
attitude of certain individuals there will result in the average sense 3
certain specific type of action. For the purposes of legal reasoning it is
essential to be able to decide whether a rule of law does or does not
carry legal authority, hence whether a legal relationship does or does
not "exist." This type of question is not, however, relevant to sociologi-
cal problems.

5. The subjective meaning of a social relationship may change, thus
a political relationship once based on solidarity may develop into a
conflict of interests. In that case it is only a matter of terminological
convenience and of the degree of continuity of the change whether we
say that a new relationship has come into existence or that the old one
continues but has acquired a new meaning. It is also possible for the
meaning to be partly constant, pardy changing.

6. The meaningful content which remains relatively constant in a
social relationship is capable of formulation in terms of maxims which (
the parties concerned expect to be adhered to by their partners on the
average and approximately. The more rational in relation to values or
to given ends the action is, the more is this likely to be the case. There
is far less possibility of a rational formulation of subjective meaning in
the case of a relation of erotic attraction or of personal loyalty or any
other affectual type than, for example, in the case of a business contract.

7. The meaning of a social relationship may be agreed upon by
mutual consent. This implies that the parties make promises covering
their future behavior, whether toward each other or toward third per-
sons. In such cases each party then normally counts, so far as he acts
rationally, in some degree on the fact that the other will orient his ac-
tion to the meaning of the agreement, as he (the first actor) under-
stands it. In part he orients his action rationally (.zweckTational) to these
expectations as given facts with, to be sure, varying degrees of subjec-
tively "loyal" intention of doing his part. But in part also he is motivated
value-rationally 'by a sense of duty, which makes him adhere to the
agreement as he understands it. This much may be anticipated. (For
a further elaboration, see sees. 9 and 13 below.)

4 ] Types of Orientation: Usage, Custom, Self-interest 2 y

4. Types of Action Orientation: Usage, Custom,
Self-Interest

Within the realm of social action certain empirical uniformities can
be observed, that is, courses of action that are repeated by the actor or
(simultaneously) occur among numerous actors since the subjective
meaning is meant to be the same. Sociological investigation is concerned
with these typical modes of action. Thereby it differs from history, the
subject of which is rather the causal explanation of important individual
events; important, that is, in having an influence on human destiny.

If an orientation toward social action occurs regularly, it will be called
"usage" (Branch*) insofar as the probability of its existence within a
group is based on nothing but actual practice. A usage will be called a
"custom" (Sitte) if the practice is based upon long standing. On the
other hand, a uniformity of orientation may be said to be "determined
by self-interest," if and insofar as the actors' conduct is instrumentally
(gweckrarional*) oriented toward identical expectations."

1. Usage also includes "fashion" (Mode). As distinguished from
custom and in direct contrast to it, usage will be called fashion so far
as the mere fact of the novelty of the corresponding behavior is the
basis of the orientation of action. Its locus is in the neighborhood of
"convention," 17 since both of them usually spring from a desire for social
prestige. Fashion, however, will not be further discussed here.

2. As distinguished from both "convention" and 'Taw," "custom"
refers to rules devoid of any external sanction. The actor conforms with
them of his own free will, whether his motivation lies in the fact that
be merely fails to think about it, that it is more comfortable to conform,
or whatever eke the reason may be. For the same reasons he can consider
it likely that other members of the group will adhere to a custom.

Thus custom is not "valid" in anything like the legal sense; conform-
ity with it is not "demanded" by anybody. Naturally, the transition from
this to validly enforced convention and to law is gradual. Everywhere
what has been traditionally handed down has been an important source
of what has come to be enforced. Today it is customary every morning to
eat a breakfast which, within limits, conforms to a certain pattern. But
there is no obligation to do so, except possibly for hotel guests, and it
• has not always been customary. On the other hand, the current mode
of dress, even though it has partly originated in custom, is today very
largely no longer customary alone, but conventional.

(On the concepts of usage and custom, the relevant parts of vol. II
of R. von Jhering's Zweck im Recht are still worth reading. Compare
also, P. Oertmann, Hechtsordnung und Verhehrssitte (1914); and
more recently E, Weigelin, Sitte, Hecht und Moral (1919), which
agrees with the author's position as opposed to that of Stammler.)

3 O BASIC SOCIOLOGICAL TERMS [ Ck. 1

3. Many of the especially notable uniformities in the course of
social action are not determined by orientation to any sort of norm
which is held to be valid, nor do they rest on custom, but entirely on
the fact that the corresponding type of social action is in the nature of
the case best adapted to the normal interests of the actors as they them-
selves are aware of them- This is above all true of economic action, for
example, the uniformities of price determination in a "free" market,
but is by no means confined to such cases. The dealers in a market
thus treat their own actions as means for obtaining the satisfaction of
the ends denned by what they realize to be their own typical economic
interests, and similarly treat as conditions the corresponding typical
expectations as to the prospective behavior of others. The more strictly
rational (xweckrationat) their action is, the more will they tend to react
similarly to the same situation. In this way there arise similarities, uni-
formities, and continuities in their attitudes and actions which are often
far more stable than they would be if action were oriented to a system
of norms and duties which were considered binding on the members of
a group. This phenomenon— the fact that orientation to the situation
in terms of the pure self-interest of the individual and of the others to
whom he is related can bring about results comparable to those which
imposednorms prescribe, very often in vain— has aroused a lively inter-
est, especially in economic affairs. Observation of this has, in fact, been
one of the important sources of economics as a science. But it is true in
all other spheres of action as well, This type, with its c'arity of self-
consciousness and freedom from subjective scruples, is the polar anti-
thesis of every sort of unthinking acquiescence in customary ways as
well as of devotion to norms consciously accepted as absolute values.
One of the most important aspects of the process of "rationaliza-
tion" of action is the substitution for the unthinking acceptance of
ancient custom, of deliberate adaptation to situations in terms of self-
interest. To be sure, this process by no means exhausts the concept of
rationalization of action. For in addition this can proceed in a variety
of other directions; positively in that of a deliberate formulation of
ultimate values (WeTtrationalisieTung); or negatively, at the expense
not only of custom, but of emotional values; and, finally, in favor of a
morally sceptical type of rationality, at the expense of anv belief in
absolute values. The many possible meanings of the concept of
rationalization will often enter into the discussion. 1S (Further remarks
on the analytial problem will be found at the end.) 18

4. The stability of merely customary action rests essentially on
the fact that the person who does not adapt himself to it is subjected
to both petty and major inconveniences and annoyances as long as the
majority of the people he comes in contact with continue to uphold
the custom and conform with it.

Similarly, the stability of action in terms of self-interest rests on
the fact that the person who does not orient his action to the interests
of others, does not "take account" of them, arouses their antagonism

4 ] Types of Orientation: Usage, Custom, Self-interest 3 1

or may end up in a situation different from that which he had fore-
seen or wished to bring about. He thus runs the risk of damaging
his own interests.

5. Legitimate Order

Action, especially social action which involves a social relationship,
may be guided by the belief in the existence of a legitimate order. The
probability that action will actually be so governed will be called the
"validity" (Geltung) of the order in question.

1. Thus, the validity of an order means more than the mere
existence of a uniformity of social action determined by custom or
self-interest. If furniture movers regularly advertise at the time many
leases expire, this uniformity is determined by self-interest. If a
salesman visits certain customers on particular days of the month or
the week, it is either a case of customary behavior or a product of self-

1 interested orientation. However, when a civil servant appears in his
office daily at a fixed time, he does not act only on the basis of
custom or self-interest which he could disregard if he wanted to; as
a rule, his action is also determined by the validity of an order (viz.,
the civil service rules), which he fulfills partly because disobedience
would be disadvantageous to him but also because its violation would
be abhorrent to his sense of duty (of course, in varying degrees).

2. Only then will the content of a social relationship be called
an order if the conduct is, approximately or on the average, oriented
toward determinable "maxims," Only then will an order be called

' "valid" if the orientation toward these maxims occurs, among other
reasons, also because it is in some appreciable way regarded by the
actor as in some way obligatory or exemplary for him. Naturally, in
concrete cases, the orientation of action to an order involves a wide
variety of motives. But the circumstance that, along with the other
sources of conformity, the order is also held by at least part of the
actors to define a model or to be binding, naturally increases the
probability that action will in fact conform to it, often to a very
considerable degree. An order which is adhered to from motives of
pure expediency is generally much less stable than one upheld on a
purely customary basis through the fact that the corresponding behavior
has become habitual. The latter is much the most common type of
subjective attitude. But even this type of order is in turn much less
stable than an order which enjoys the prestige of being considered
binding, or, as it may be expressed, of 'legitimacy." The transitions
between orientation to an order from motives of tradition or of ex-
pediency to the case where a belief in its legitimacy is involved are
empirically gradual.

3 2 BASIC SOCIOLOGICAL TERMS [ Ck. 1

3. It is possible for action to be oriented to an order in other
ways tHan through conformity with its prescriptions, as they are
generally understood by the actors. Even in the case of evasion or
disobedience, the probability of their being recognized as valid norms
may have an effect on action. This may, in the first place, be true
from the point of view of sheer expediency. A thief orients bis action
to the validity of the criminal law in that he acts surreptitiously. The
fact that the order is recognized as valid in his society is made
evident by the fact that he cannot violate it openly without punish-
ment. But apart from this limiting case, it is very common for
violation of an order to be confined to more or less numerous partial
deviations from it, or for the attempt to be made, with varying degrees
of good faith, to justify the deviation as legitimate. Furthermore, there
may exist at the same time different interpretations of the meaning
of the order. In such cases, for sociological purposes, each can be said
to be valid insofar as it actually determines the course of action. The
fact that, in the same social group, a plurality of contradictory
systems of order may all be recognized as valid, is not a source of
difficulty for the sociological approach. Indeed, it is even possible for
the same individual to orient his action to contradictory systems of
order. This can take place not only at different times, as is an every-
day occurrence, but even in the case of the same concrete act. A
person who fights a duel follows the code of honor; but at the same
time, insofar as he either keeps it secret or conversely gives himself
up to the police, he takes account of the criminal law. To be sure,
when evasion or contravention of the generally understood meaning
of an order has become the rule, the order can be said to be "valid"
only in a limited degree and, ir the extreme case, not at all. Thus ,
for sociological purposes there does not exist, as there does for the
law, a rigid alternative between the validity and lack of validity of a
given order. On the contrary, there is a gradual transition between
the two extremes; and also it is possible, as it has been pointed out,
for contradictory systems of order to exist at the same time. In that
case each is "valid" precisely to the extent that there is a probability
that action will in fact be oriented to it.

[Excursus:] ( Those familiar with the literature of this subject will
recall the part played by the concept of "order" in the brilliant book
of Rudolf Stammler, which was cited in the prefatory note, a book
which, though like all his works it is very able, is nevertheless funda-
mentally misleading and confuses the issues in 3 catastrophic fashion.
(The reader may compare the author's critical discussion of it, which
was also cited in the same place, a discussion which, because of the
author's annoyance at Stammler's confusion, was unfortunately written
in somewhat too acrimonious a tone.) Stammler fails to distinguish
the normative meaning of "validity" from the empirical. He further
fails to recognize that social action is oriented to other things beside
systems of order. Above all, however, in a way which is wholly

5 ] Legitimate Order 3 3

indefensible from a logical point of view, he treats order as a "form"
of social action and then attempts to bring it into a type of relation
to "content," which is analogous to that of form and content in the
theory of knowledge. Other errors in his argument will be left aside.
But economic action, for instance, is oriented to knowledge of the
relative scarcity of certain available means to want satisfaction, in
relation to the actor's state of needs and to the present and probable
action of others, insofar as the latter affects the same resources. But
at the same time, of course, the actor in his choice of economic pro-
cedures naturally orients himself in addition to the conventional and
legal rules which he recognizes as valid, that is, of which he knows that
a violation on his part would call forth a given reaction of other
persons. Stammler succeeds in introducing a state of hopeless con-
fusion into this very simple empirical situation, particularly in that
he maintains that a causal relationship between an order and actual
empirical action involves a contradiction in terms. It is true, of course,
that there is no causal relationship between the normative validity of
an order in the legal sense and any empirical process. In that context
there is only the question of whether the order as correctly interpreted
in the legal sense "applies" to the empirical situation. The question
*is whether in a normative sense it should be treated as valid and, if so,
what the content of its normative prescriptions for this situation
should be. But for sociological purposes, as distinguished from legal,
it is only the probability of orientation to the subjective belief in the
validity of an order which constitutes the valid order itself. It is
undeniable that, in the ordinary sense of the word "causal," there
is a causal relationship between this probability and the relevant
course of economic action.

6 . Types of Legitimate Order: Convention and Law

The legitimacy of an order may be guaranteed in two principal
ways : i0

I. The guarantee may he purely subjective, being either

1. affectuai; resulting from emotional surrender; or

2. value-rational: determined by the belief in the absolute validity
of the order as the expression of. ultimate values of an ethical,
esthetic or of any other type; or

3. religious: determined by the belief that salvation depends upon
obedience to the order.

II. The legitimacy of an order may, however, be guaranteed also Cor
merely) by the expectation of specific external effects, that is, by interest
situations.

3 4 BASIC SOCIOLOGICAL TERMS [Ch. I

An older will be called

(a) convention so far as its validity is externally guaranteed by the
probability that deviation from it within a given social group will
resillt in a relatively general and practically significant reaction of
disapproval;

(b) lav? if it is externally guaranteed by the probability that physical
or psychological coercion will be applied by a staff of people in order
to bring about compliance or avenge violation.

(On the concept of convention see Weigelin, op. cit., and F.
Tonnies, Die SUte [1909], besides Jhering, op, cit.')

1. Trie term convention will be employed to designate that part of
the custom followed within a given social group which is recognized
as "binding" and protected against violation by sanctions of dis-
approval. As distinguished from "law" in the sense of the. present
discussion, it is not enforced by a staff. Stammfer distinguishes con-
vention from law in terms of the entirely voluntary character of
conformity. This is not, however, in accord with everyday usage and

. does not even fit the examples he gives. Conformity with convention
in such matters as the usual forms of greeting, the mode of dress
recognized as appropriate or respectable, and various of the rules
governing the restrictions on social intercourse, both in form and in
content, is very definitely expected of the individual and regarded
as binding on him. It is not, as in the case of certain ways of
preparing food, a mere usage, which he is free to conform to or not
as he sees fit. A violation of conventional rules — such as standards
of "respectability" QStandesshte) — often leads to the extremely severe
and effective sanction of an informal boycott on the part of members of
one's status group. This may actually be a more severe punishment than '
any legal penalty. The only thing lacking is a staff with the specialized
function of maintaining enforcement of the order, such as judges, prose-
cuting attorneys, administrative officials, or sheriffs. The transition, how-
ever, is gradual. The case of conventional guarantee of an order which
most closely approaches the legal is the application of a formally threat-
ened and organized boycott. For terminological purposes, this is best
considered a form of legal coercion- Conventional rules may, in addition
to mere disapproval, also be upheld by other means; thus domestic au-
thority may be employed to expel a visitor who defies convention. This
fact is not, however, important in the present context. The decisive
point is that the individual, by virtue of the existence of conventional
disapproval, applies these sanctions, however drastic, on his own author-
ity, not as a member of a staff endowed with a specific authority for this
purpose.

2. For the purposes of this discussion the concept "law" will be
made to turn on the presence of a staff engaged in enforcement, how-
ever useful it might be to define it differently for other purposes. The

6 ] Types of Legitimate Order. Convention and Law 3 5

character of this agency naturally need not be at all similar to what is
at present familiar. In particular it is not necessary that there should be
any specifically "judicial" authority- The dan, as an agency of blood
revenge and of the prosecution of feuds, is such an enforcing agency if
there exist any sort of rules which governs its behavior in such situa-
tions. But this is on the extreme borderline of what can be called legal
enforcement. As is well known, it has often been denied that interna-
tional law could be called law, precisely because there is no legal au-
thority above the state capable of enforcing it. In terms of the present
terminology this would be correct, for we could not call "law" a system
the sanctions of which consisted wholly in expectations of disapproval
and of the reprisals of injured parties, which is thus guaranteed entirely
by convention and self-interest without the help of a specialized en-
forcement agency. But for purposes of legal terminology exactly the
opposite might well be acceptable.

In any case the means of coercion are irrelevant. Even a "brotherly
admonition," such as has been used in various religious sects as the first
degree of mild coercion of the sinner, is "law" provided it is regulated
by some order and applied by a staff. The same is to be said about the
'[Roman] censorial reprimand as a means to guarantee the observance of
ethical duties and, even more so, about psychological coercion through
ecclesiastic discipline. Hence "law" may be guaranteed by hierocratic as
well as political authority, by the statutes of a voluntary association or
domestic authority or through a sodality or some other association. The
rules of [German students' fraternities Jen own as] the Kcmmfittt [and
regulating such matters as convivial drinking or singing] are also law in
our sense, just as the case of those [legally regulated but unenforceable]
duties which are mentioned in Section 888, paragraph 2 of the German
Code of Civil Procedure [for instance, the duty arising from an engage-
ment to many]. sl The leges imperfectae and the category of "natural
obligations" are forms of legal terminology which express indirectly
limits or conditions of the application of compulsion. In the same sense
a trade practice which is compulsorily enforced is also law. See sees. 157
and 242 of the German Civil Code. On the concept of "fair practice"
Cgute S»£te), that is, desirable custom which is worthy of legal sanction,
see Max Rumelin's essay in the Schtvdhische Heimatgabe fur Theodor
Hating (1918).

3. It is not necessary for a valid order to be of a general and abstract
character. The distinction between a legal norm and the judicial deci-
sion in a concrete case, for instance, has not always and everywhere
been as clearly made as we have today come to expect. An "order" may
thus occur simply as the order governing a single concrete situation. The
details of this subject belong in the Sociology of Law. But for present
purposes, unless otherwise specified, the modem distinction between a
norm and a specific decision will be taken for granted.

4. A system of order which is guaranteed by external sanctions may
at the same time be guaranteed by disinterested subjective attitudes*

3 6 BASIC SOCIOLOGICAL TERMS [ Ch. I

The relations of law, convention, and "ethics" do not constitute a problem
for sociology. From a sociological point of view an "ethical" standard is
one to which men attribute a certain type of value and which, by virtue
of this belief, they treat as a valid norm governing their action. In this
sense it can be spoken of as denning what is ethically good in the same
w iy that action which is called beautiful is measured by esthetic stand-
ards. It is possible for ethically normative beliefs of this kind to have a
profound influence on action in the absence of any sort of external
guarantee. This is often the case when the interests of others would be
little affected by their violation.

Such ethical beliefs are also often guaranteed by religious motives,
but they may at the same time, in the present' terminology, be upheld
to an important extent by disapproval of violations and the consequent
boycott, or even legally with the corresponding sanctions of criminal or
private law or of police measures. Every system of ethics which has in a
sociological sense become validly established is likely to be upheld to a
large extent by the probability that disapproval will result from its viola-
tion, that is, by convention. On the other hand, it is by no means neces-
sary that all conventionally or legally guaranteed forms of order should
claim the authority of ethical norms. Legal rules, mych more often than
conventional ones, may have been established entirely on grounds of
expediency. Whether a belief in the validity of an order as such, which
is current in a social group, is to be regarded as belonging to the realm
of "ethics" or is a mere convention or a mere legal norm, cannot, for
. sociological purposes, be decided in general terms. It must be treated as
relative to the conception of what values are treated as "ethical" in the
social group in question.

7. Bases of Legitimacy: Tradition, Faith, Enactment
The actors may ascribe legitimacy to a social order by virtue of:

(a) tradition: valid is that which has always been;

(b) affectual, especially emotional, faith: valid is that which is newly
revealed or exemplary;

(d) positive enactment which is believed to be legal.
Such legality may be treated as legitimate because:

(») it derives from a voluntary agreement of the interested parties;
09) it is imposed by an authority which is held to be legitimate and
therefore meets with compliance.

AH further details, except for a few other concepts to be defined
below, belong in the Sociology of Law and the Sociology of Domination.
For the present, only a few remarks are necessary.

7 ] _ Bases of Legitimacy: Tradition, Faith, Enactment 3 7

1. The validity of a social order by virtue of the sacredness of tradi-
tion is the oldest and most universal type of legitimacy. The fear of
magical evils reinforces the general psychological inhibitions against any
sort of change in customary modes of action. At the same time the mani-

' fold vested interests which tend to favor conformity with an established
order help to perpetuate it. (More in ch. III.)

2. Conscious departures from tradition in the establishment of a
new order were originally almost entirely due to prophetic oracles or at
least to pronouncements which were sanctioned as prophetic and thus
were considered sacred. This was true as late as the statutes of the
Greek aisymnetai. Conformity thus depended on belief in the legiti-
macy of the prophet. In times of strict traditionalism a new order — one
actually regarded as new— was not possible without revelation unless it
was claimed that it had always been valid though not yet rightly known,
or that it had been obscured for a time and was now being restored to its
rightful place,

3. The purest type of legitimacy based on value-rationality is natural
law. The influence of its logically deduced propositions upon actual con-
duct has lagged far behind its ideal claims; that they have had some
influence cannot be denied, however. Its propositions must be distin-
guished from those of revealed, enacted, and traditional law.

4. Today the most common form of legitimacy is the belief in legal-
ity, the compliance with enactments which are formally correct and
which have been made in the accustomed manner. In this respect, the
distinction between an order derived From voluntary agreement and one
which has been imposed is only relative. For so far as the agreement
underlying the order is not unanimous, as in the past has often been
held necessary for complete legitimacy, the order is actually imposed
upon the minority; in this frequent case the order in a given group de-
pends upon the acquiescence of those who hold different opinions. On
the other hand, it is very common for minorities, by force or by the use
of more ruthless and far-sighted methods, to impose an order which in
the course of time comes to be regarded as legitimate by those who orig-
inally resisted it. Insofar as the ballot is used as a legal means of altering
an order, it is very common for the will of a minority to attain a formal
majority and for the majority to submit. In this case majority rule is a
mere illusion. The belief in the legality of an order as established by
voluntary agreement is relatively ancient and is occasionally found
among so-called primitive people; but in these cases it is almost always
supplemented by the authority of oracles.

5. So far as it is not derived merely from fear or from motives of
expediency, a willingness to submit to an order imposed by one man or
a small group, always implies a belief in the legitimate authority (Herr-
schaftsgewali) of the source imposing it. This subject will be dealt with
separately below : see sections 13 and 16 and ch. III.

6. Submission to an order is almost always determined by a variety
of interests and by a mixture of adherence to tradition and belief in

3 8 BASIC SOCIOLOGICAL TERMS [ Ch. I

legality, unless it is a case of entirely new regulations. In a very large
proportion of cases, the actors subject to the order are of course not even
aware how far it is a matter of custom, of convention, or of law, In such
cases the sociologist must attempt to formulate the typical basis of valid-
ity.

8. Conflict, Competition, Selection

A social relationship will be referred to as "conflict" (Kampf) insofar
as action is oriented intentionally to carrying out the actor's own will
against the resistance of the other party or parties. The term "peaceful"
conflict will be applied to cases in which actual physical violence is not
employed. A peaceful conflict is "competition" insofar as it consists in a
formally peaceful attempt to attain control over opportunities and ad-
vantages which are also desired by others. A competitive process is "regu-
lated" competition to the extent that its ends and means are oriented to
an order. The struggle, often latent, which takes place between human
individuals or social types, for advantages and for survival, but without
a meaningful mutual orientation in terms of -conflict, will be called "se-
lection." Insofar as it is a matter of the relative opportunities of individ-
uals during their own lifetime, it is "social selection"; insofar as it
concerns differential chances for the survival of hereditary characteristics,
"biological selection,".

i. There are all manner of continuous transitions ranging from the i
bloody type of conflict which, setting aside all rules, aims at the destruc-
tion of the adversary, to the case of the battles of medieval chivalry,
bound as they were to the strictest conventions, and to the strict regula-
tions imposed on sport by the rules, of the game. A classic example of
conventional regulation in war is the herald's call before the battle of
Fontenoy: "Messieurs les Anglais, tirez Ies premiers/' 22 There are transi-
tions such as that from unregulated competition of, let us say, suitors for
. the favor of a woman to the competition for economic advantages in
exchange relationships, bound as that is by the order governing the
market, or to strictly regulated competitions for artistic awards or, finally,
to the struggle for victory in election campaigns. The conceptual separa-
tion of peaceful [from violent] conflict is justified by the quality of the
means normal to it and the peculiar sociological consequences of its oc-
currence (see ch. II and later).

2. All typical struggles and modes of competition which take place
on a large scale will lead, in the long run, despite the decisive im-
portance in many individual cases of accidental factors and luck, to a
selection of those who have in the higher degree, on the average, pos-
sessed the personal qualities important to success. What qualities are

8 ] Conflict, Competition, Selection 3 9

important depends on the conditions in which the conflict or competi-
tion takes place. It may be a matter of physical strength or of unscrupu-
lous cunning, of the level of mental ability or mere lung power and
skill in the technique of demagoguery, of loyalty to superiors or of
ability to flatter the masses, of creative originality, or of adaptability, of
qualities which are unusual, or of those which are possessed by the
mediocre majority. Among the decisive conditions, it must not be for-
gotten, belong the systems of order to which the behavior of the parties
is oriented, whether traditionally, as a matter of rationally disinterested
loyalty (wertrational'), or of expediency. Each type of order influences
opportunities in the process of social selection differendy.

Not every process of social selection is, in the present sense, a case of
conflict. Social selection, on the contrary, means only in the first in-
stance that certain types of behavior, and possibly of the corresponding
personal qualities, lead more easily to success in the role of "lover,"
"husband," "member of parliament," "official," "contractor," "managing
director," "successful business man," and so on. But the concept does not
specify whether this differential advantage in selection for social success
is brought to bear through conflict or not, neither does it specify
whether the biological chances of survival of the type are affected one
way or the other.

It is only where there is a genuine competitive process that the term
conflict will be used [i.e., where regulation is, in principle, possible]."
It is only in the sense of "selection" that it seems, according to our
experience, that conflict is empirically inevitable, and it is furthermore
only in *he sense of biological selection that it is inevitable in principle-
Selection is inevitable because apparently no way can be worked out of
eliminating it completely. Even the most strictly pacific order can elimi-
nate means of conflict and the objects of and impulses to conflict only
partially. Other modes of conflict would come to the fore, possibly in
processes of open competition. But even on the Utopian assumption that
all competition were completely eliminated, conditions would still lead
to a latent process of selection, biological or social, which would favor
the types best adapted to the conditions, whether their relevant qualities-
were mainly determined by heredity or by environment. On an empiri-
cal level the elimination of conflict cannot go beyond a point which
leaves room for some social selection, and in principle a process of bio-
logical selection necessarily remains.

3. From the struggle of individuals for personal advantages and sur-
vival, it is naturally necessary to distinguish the "conflict" and the "selec-
tion" of social relationships. It is only in a metaphorical sense that these
concepts can be applied to the latter. For relationships exist only as
individual actions with particular subjective meanings. Thus a process of
selection or a conflict between them means only that one type of action -
has in the course of time been displaced by another, whether it is action
by the same persons or by others. This may occur in various ways.
Human action may in the first place be consciously aimed to alter cer-

4 O BASIC SOCIOLOGICAL TERMS [ Ch. I

tain social relationships — that is, to alter the corresponding action — or it
may be directed to the prevention of their development or continuance.
Thus a "state" may be destroyed by war or revolution, or a conspiracy
may be broken up by savage, suppression; prostitution may be suppressed
by police action; "usurious" business practices, by denial of legal protec-
tion or by penalties. Furthermore, social relationships may be influenced
by the creation of differential advantages which favor one type over an-
other. It is possible either for individuals or for organized groups to
pursue such ends. Secondly, it may, in various, ways, be an unantici-
pated consequence of a course of social action and its relevant conditions
that certain types of social relationships (meaning, of course, the cor-
responding actions) will be adversely affected in their opportunities to
maintain themselves or to arise. All changes of natural and social condi-
tions^have some sort of effect on the differential probabilities of survival
of social relationships. Anyone is at liberty to speak in such cases of a
process of "selection" of social relationships. For instance, he may say
that among several states the "strongest," in the sense of the best
"ad. - d," is victorious. It must, however, be kept in mind that this
so-caiitd "selection" has nothing to do with the selection of types of
human individuals in either the social or the biological sense. In every
case it is necessary to inquire into the reasons which have led to a change
in the chances of survival of one or another form of social action or
social relationship, which have broken up a social relationship or per-
mitted it to continue at the expense of other competing forms. The ex-
planation of these processes involves so many factors that it does not
seem expedient to employ a single term for them. When this is done,
there is always a danger of introducing uncritical value- judgments into
empirical investigation. There is, above all, a danger of being primarily
concerned with justifying the success of an individual case. Since indi-
vidual cases are often dependent on highly exceptional circumstances,
they may be in a certain sense "fortuitous." In recent years there has
been more than enough of this kind of argument. The fact that a given
specific social relationship has been eliminated for reasons peculiar to a
particular situation, proves nothing whatever about its "fitness to survive"
in general terms.

9. Communal and Associative Relationships

A social relationship will be called "communal" (V ergemeinschaf-
tung) if and so far as the orientation of social action — whether in the
individual case, on the average, or in the pure type- — is based on a
subjective feeling of the parties, whether affectual or traditional, that
they belong together.

A social relationship will be called "associative" QJergeselhchaftung)
if and insofar as the orientation of social action within it rests on a

o ] Communal and Associative Relationships 4 1

rationally motivated adjustment of interests or a similarly motivated
agreement, whether the basis of rational judgment be absolute values or
reasons of expediency. It is especially common, though by no means
inevitable, for the associative type of relationship to rest on a rational
agreement by mutual consent. In that case the corresponding action is,
at the pole of rationality, oriented either to a value-rational belief in one's
own obligation, or to a rational (zweckrationale) expectation that the
other party will live up to it.

This terminology is similar to the distinction made by Ferdinand
Tonnies in his pioneering work, Gemeinschaft und Gesellsckaft; but for
his purposes, Tonnies has given this distinction a rather more specific
meaning than would be convenient for purposes of the present discus-
sion. 2 * The purest cases of associative relationships are: (a) rational free
market exchange, which constitutes a compromise of opposed but com-
plementary interests; (b) the pure voluntary association based on self-
interest (Zweckverein'), a case of agreement as to a long-run course of
action oriented purely to the promotion of specific ulterior interests,
economic or other, of its members; (c) the voluntary association of indi-
viduals motivated by an adherence to a set of common absolute values
(Gesinnungsvere'm^), for example, the rational sect, insofar as it does not
cultivate emotional and affective interests, but seeks only to serve a
"cause." This last case, to be sure, seldom occurs in anything approach-
ing the pure type.

2. Communal relationships may rest on various types of affectual,
emotional, or traditional bases. Examples are a religious brotherhood, an
erotic relationship, a relation of persona] loyalty, a national community,
the esprit de corps of a military unit. The type case is most conveniently
illustrated by the family. But the great majority of social relationships
has this characteristic to some degree, while being at the same time to
some degree determined by associative factors. No matter how calculat-
ing and hard-headed the ruling considerations in such a social relation-
ship^ — -as that of a merchant to his customers — may be, it is quite pos-
sible for it to involve emotional values which transcend its utilitarian
significance. Every social relationship which goes beyond the pursuit of
immediate common ends, which hence lasts for long periods, involves .
relatively permanent social relationships between the same persons, and
these cannot be exclusively confined to the technically necessary activi-
ties. Hence in such cases as association in the same military unit, in the
same school class, in the same workshop or office, there is always some
tendency in this direction, although the degree, to he sure, varies enor-
mously. Conversely, a social relationship which is normally considered
primarily communal may involve action on the part of some or even all
of the participants which is to an important degree oriented to consid-
erations of expediency. There is, for instance, a wide variation in the
extent to which the members of a family group feel a genuine com-
munity of interests or, on the other hand, exploit the relationship for

4 2 BASIC SOCIOLOGICAL TERMS [ Ch. J

their own ends. The concept of communal relationship has been in-
tentionally denned in very general terms and hence includes a very
heterogeneous group of phenomena.

3. The communal type of relationship is, according to the usual
interpretation of its subjective meaning, the most radical antithesis of
conflict. This should not, however, be allowed to obscure the fact that
coercion of all sorts is a very common thing in even the most intimate of
such communal relationships if one party is weaker in character than
the other. Furthermore, a process of the selection of types leading to
differences in opportunity and survival, goes on within these relation-
ships just the same as anywhere else. Associative relationships, on the
other hand, very often consist only in compromises between rival in-
terests, where only a part of the occasion or means of conflict has been
eliminated, or even an attempt has been made to do so. Hence, outside
the area of compromise, the conflict of interests, with its attendant com-
petition for supremacy, remains unchanged. Conflict and communal
relationships are relative concepts. Conflict varies enormously according
to the means, employed, especially whether they are violent or peaceful,
and to the ruthlessness with which they are used. It has already been
pointed out that any type of order governing social action in some way
leaves room for a process of selection among various rival human types.

4. It is by no means true that the existence of common qualities, a
common situation, or common modes of behavior imply the existence of
a communal social relationship. Thus, for instance, the possession of a
common biological inheritance by virtue of which persons are classified
as belonging to the same "race," naturally implies no sojS of communal
social relationship between them. By restrictions on stjdal intercourse
and on marriage persons may find themselves in a similar situation, a
situation of isolation from the environment which imposes these distinc-
tions. But even if they all react to this situation in the same way, this
does not constitute a communal relationship. The latter does not even
exist if they have a common "feeling" about this situation and its conse-

Suences. It is only when this feeling leads to a mutual orientation of
leir behavior to each other that a social relationship arises between
them rather than of each to the environment Furthermore, it is only so
far as this relationship involves feelings of belonging together that it is
a "communal" relationship. In the case of the jews, for instance, except
for Zionist circles and the action of certain associations promoting speci-
fically Jewish interests, there thus exist communal relationships only to
a relatively small extent; indeed, jews often repudiate the existence of a
Jewish "community."

A common language, which arises from a similarity of tradition
through the family and the surrounding social enviror merit, facilitates
mutual understanding, and thus the formation of all types of social rela-
tionships, in the highest degree. But taken by itself it is not sufficient
to constitute a communal relationship, rather, it facilitates intercourse
within thegroups concerned, hence the development of associate rela-
tionships. This takes place between individuals, not because they speak

9 ] Communal and Associative Relationships 4 3

the same language, but because they have other types of interests.
Orientation to the rules of a common language is thus primarily impor-
tant as a means of communication, not as the content of a social rela-
tionship. It is only with the emergence of a consciousness of difference
from third persons who speak a different language that the fact that
two persons speak the same language, and in that respect share a com-
mon situation, can lead them to a feeling of community and to modes of
social organization consciously based on the sharing of the common
language.

Participation in a "market" is of still another kind. It encourages
association between the exchanging parties and a social relationship,
above all that of competition, between the individual participants who
must mutually orient their action to each other. But no further modes
of association develop except in cases where certain participants enter
into agreements in order to better their competitive situations, or where
they all agree on rules for the purpose of regulating transactions and of
securing favorable general conditions for all. (It may further be re-
marked that the market and the competitive economy resting on it form
the most important type of the reciprocal determination of action in
terms of pure self-interest, a type which is characteristic of modern eco-
nomic life.)

lo. Open and Closed Relationships

A social relationship, regardless of whether it is communal or associ-
ative in character, will be spoken of as "open" to outsiders if and inso-
far as its system of order does not deny participation to anyone who
wishes to join and is actually in a position to do so. A relationship will,
on the other hand, bes called "closed" against outsiders, so tar as, accord-
ing to its subjective meaning and its binding rules, participation of certain
persons is excluded, limited, or subjected $0 conditions. Whether a rela-
tionship is open or closed may be determined traditionally, afrectually,
or rationally in terms of values or of expediency, It is especially likely to
be closed, for rational reasons, in the following type of situation: a social
relationship may provide the parties to it with opportunities for the
satisfaction of spiritual or material interests, whether absolutely or instro-
mentally, or whether it is achieved through co-operative action or by a
compromise of interests. If the participants expect that the adnusskm of
others will lead to an improvement of their situation, an improvement in
degree, in kind, in the security or the value of the satisfaction, their inter-
est will be in keeping the relationship open. If, on the other hand, their
expectations are of improving their position by monopolistic tactics, their
interest is in a closed relationship.

4 4 BASIC SOCIOLOGICAL TERMS [ Ch. I

There are various ways m which it is possible for a closed social rela-
tionship to guarantee its monopolized advantages to the parties, (a) Such
advantages may be left free to competitive struggle within the group; (b)
they may be regulated or rationed in amount and kind, or (c) they may
be appropriated by individuals or sub-groups on a permanent basis and
become more or less inalienable. The last is a case of closure within, as
well as against outsiders. Appropriated advantages will be called "rights."
As determined by the relevant order, appropriation may be (i) for the
benefit of the members of particular communal or associative groups (for
instance, household groups), or (2) for the benefit of individuals. In
the latter case, the individual may enjoy his rights on a purely personal
basis or in such a way that in case of his death one or more other persons
related to the holder of the right by birth (kinship), or by some other
social relationship, may inherit the rights in question. Or the rights may
pass to one or more individuals specifically designated by the holder.
These are cases of hereditary appropriation. Finally, (3) it may be that
the holder is more or less fully empowered to alienate his rights by volun-
tary agreement, either to other specific persons or to anyone he chooses.
This is alienable appropriation. A party to a closed social relationship
will be called a "member"; in case his participation is regulated in such
a way as to guarantee him appropriated advantages, a privileged mem-
ber (Rechtsgenosse). Appropriated rights which are enjoyed by individ-
uals through inheritance or by hereditary groups, whether communal or
associative, will be called the "property" of the individual or of groups
in question; and, insofar as they are alienable, "free" property.

The apparently gratuitous tediousness involved in the elaborate def-
inition of the above concepts is an example of the fact that we often
neglect to think out clearly what seems to be obvious, because it is in-
tuitively familiar.

1. (a) Examples of communal relationships, which tend to be closed
on a traditional basis, are those in which membership is determined by
family relationship.

(b) Personal emotional relationships are usually affectually closed.
Examples are erotic relationships and, very commonly, relations of per-
sonal loyalty.

(c) Gosure on the basis of value-rational commitment to values is
usual in groups sharing a common system of explicit religious belief.

(d) Typical cases of rational closure on grounds of expediency are
economic associations of a monopolistic or a plutocratic character.

A few examples may be taken at random. Whether a group of peo-
ple engaged in conversation is open or closed depends on its content.
General conversation is apt to be open, as contrasted with intimate con-
versation-ot the imparting of official information. Market relationships

i o ] Of en and Closed Relationships 4 5

are in most, or at least in many, cases essentially open. In the case of
many relationships, both communal and associative, there is a tendency
to shift from a phase of expansion to one of exclusiveness. Examples are
the guilds and the democratic city-states of Antiquity and the Middle
Ages. At times these groups sought to increase their membership in the
interest of improving the security of their position of power by adequate
numbers. At other times they restricted their membership to protect
the value of their monopolistic position. The same phenomenon is not
uncommon in monastic orders and religious sects which have passed
from a stage of religious proselytizing to one of restriction in the interest
of the maintenance of an ethical standard or for the protection of mate-
rial interests. There is a similar close relationship between the extension
of market relationships in the interest of increased turnover on the one
hand, their monopolistic restriction on the other. The promotion of
linguistic uniformity is today a natural result of the interests of pub-
lishers and writers, as opposed to the earlier, not uncommon, tendency
for status groups to maintain linguistic peculiarities or even for secret
languages to emerge.

2. Both the extent and the methods of regulation and exclusion in
1 relation to outsiders may vary widely, so that the transition from a state

of openness to one of regulation and closure is gradual. Various condi-
tions of participation may be laid down; qualifying tests, a period of
probation, requirement of possession of a share which can be purchased
under certain conditions, election of new members by ballot, member-
ship or eligibility by birth or by virtue of achievements open to anyone.
Finally, in case of closure and the appropriation of rights within the
group, participation may be dependent on the acquisition of an appro-
priated right. There is * wide variety of different degrees of closure and
of conditions of participation. Thus regulation and closure are relative
concepts. There are all manner of gradual shadings as between an ex-
clusive club, a theatrical audience the members of which have pur-
chased tickets, and a party rally to which the largest possible number
has been urged to come; similarly, from a church service open to the
general public through the rituals of a limited sect to the mysteries of
a secret cult.

3. Similarly, closure within the group may also assume the most
varied forms. Thus a caste, a guild, or a group of stock exchange
brokers, which is closed to outsiders, may^Ilow to its members a per-
fectly free competition for all the advantages which the group as a
whole monopolizes for itself. Or it may assign every member strictly to
the enjoyment of certain advantages, such as claims over customers 01
particular business opportunities, for life or even on a hereditary basis.
This is particularly characteristic of India. Similarly, a closed group of
settlers (Markgenossensckaft) may allow its members free use of the
resources of its area or may restrict them rigidly to a plot assigned to
each individual household. A closed group of colonists may allow free
use of the land or sanction and guarantee permanent appropriation of

4 6 BASIC SOCIOLOGICAL TERMS [ Ch. I

separate holdings. In such cases all conceivable transitional and inter-
mediate forms can be found. Historically, the closure of eligibility to
fiefs, benefices, and offices within the group, and the appropriation on
the part of those enjoying them, have occurred in the most varied forms.
Similarly, the establishment of rights to and possession of particr 1
jobs on the part of workers may develop all the way from the "closed
shop" to a right to a particular job. The first step in this development
may be to prohibit the dismissal of a worker without the consent of the
workers' representatives. The development of the "works councils" [in
Germany after 1918] might be a first step in this direction, though it
need not be."

All the details must be reserved for the later analysis. The most
extreme form of permanent appropriation is found in cases where par-
ticular rights are guaranteed to an individual or to certain groups of
them, such as households, clans, families, in such a way that it is speci-
fied in the order either that, in case of death, the rights descend to specific
heirs, or that the possessor is free to transfer them to any other person
at will. Such a person thereby becomes a party to the social relation-
ship so that, when appropriation has reached this extreme within the
group, it becomes to that extent an open group in relation to outsiders.
This is true so long as acquisition of membership is not subject to the
ratification of the other, prior members.

4. The principal motives for closure of a relationship are: (a) The
maintenance of quality, which is often combined with the interest in
prestige and the consequent opportunities to enjoy honor, and even
profit, examples are communities of ascetics, monastic orders, especially,
for instance, the Indian mendicant orders, religious sects like the Puri-
tans, gitganized groups of warriors, of ntinisteriaUs and other tunc- ,
tionaries, organized citizen bodies as in the Greek States, craft guilds;

(b) the contraction of advantages in relation to consumption needs
Q'iahrungssfielTaum)** examples are monopolies of consumption, the
most developed form of which is a self-subsistent village community;

(c) the growing scarcity of opportunities for acquisition (Erwerksspiel-
raum). This is found in trade monopolies such as guilds, the an-
cient monopolies of fishing rights, and so on. Usually motive (a) is
combined with (b) or (c).

1 1 . The Imputation of Social Action: Representation and
Mutual Responsibility

■Within a social relationship, whether it is traditional or enacted, cer-
tain kinds of action of each participant may be imputed to all others, in
which case we speak o£ "mutually responsible members"; or the action
ei certain members (the "representatives") may be attributed to the

1 1 ] Re-presentation and Mutual Responsibility 4 7

others (the "represented"). In both cases, the members will share the
resulting advantages as well as the disadvantages.

In accordance with the prevailing order, the power of representation
may be (a) completely appropriated in all its forms — the case of self-
appointed authority (JLigenvollmachi); (b) conferred in accordance with
particular characteristics, permanently or for a limited term; (c) conferred
by specific acts of the members or of outside persons, again permanently
or for a limited term — the cases of "derived" or "delegated" powers.

There are many different conditions which determine the ways in
which social relationships, communal or associative, develop relations of
mutual responsibility or of representation. In general terms, it is possible
only to say that one of the most decisive is the extent to which the action
of the group is oriented to violent conflict or to peaceful exchange as its
end. Besides these, many special circumstances, which can only be dis-
cussed in the detailed analysis, may be of crucial importance. It is not
surprising that this development is least "conspicuous in groups which
pursue purely ideal ends by peaceful means. Often the degree of closure
against outsiders is c .osely related to the development of mutual responsi-
bility or of representation. But this is by no means always the case.

1. Imputation may in practice involve both active and passive mu-
tual responsibility. All participants may be held responsible for the
action of any one just as he himself is, and similarly may be entitled to
enjoy any benefits resulting from this action. This responsibility may
be owed to spirits or gods, that is, involve a religious orientation; or it
may be responsibility to other human beings, as regulated by convention
or by law. Examples of regulation by convention are blood revenge
carried out against or with the help of members of the kin group, and
reprisals against the inhabitants of the town or the country of the of-
fender; of the legal type, formal punishment of relatives and members
of the household or community, and personal liability of members of a
household or of a commercial partnership for each other's debts. Mutual
responsibility in relation to gods has also had very significant historical
results. For instance, in the covenant of Israel with Jahveh, in early
Christianity, and in the early Puritan community.

On the other hand, the imputation may mean no more than that the
participants in 3 closed social relationship, by virtue of the traditional
or legal order, accept as legally binding a representative's decisions,
especially over economic resources. (Examples are the "validity" of de-
cisions by the executive committee of a voluntary association or by
the responsible agent of a political or economic organization over re-
sources which, as specified in the statutes, are meant to serve the group's
purposes.)

2. Mutual responsibility is typically found in the following cases:
(a) In traditional, communal groups based on birth or th» sharing of a

4 8 BASIC SOCIOLOGICAL TERMS [ Ch. I

common life; for example, the household and the kinship unit; (b)
in closed relationships which maintain by force a monopolized position
and control over the corresponding benefits; the typical case is the
political association, especially in the past, but also today, most strikingly
in time of war; (c) in profit-oriented enterprises whose participants
personally conduct the business; the type case is the business partner-
ship; (d) in some cases, in labor associations; e.g., the [Russian] artel.
Representation is most frequently found in associations devoted to
specific purposes and in legally organized groups, especially when funds
have been collected and must be administered in the interests of the
group. This will be further discussed in the Sociology of Law.

3. The power of representation is conferred according to characteris-
tics when it goes by seniority or some other such rule.

4. It is not possible to carry the analysis of this subject further in
general terms; its elaboration must be reserved to the detailed investiga-
tion. The most ancient and most universal phenomenon in this field is
that of reprisal, meant either as revenge or as a means of gaining control
of hostages, or some other kind of security against future injury.

12. The Organization

A social relationship which is either closed or limits the admission of
outsiders will be called an organization (Verhand) when its regulations
are enforced by specific individuals : a chief and, possibly, an administra-
tive staff, which normally also has representative powers. The incumbency
of a policy-making position or participation in the functions of the staff,
constitute "executive powers" (,RegieTungsgewakten\ These may be ap-
propriated, or they may be assigned, in accordan«*with the regulations
of the organization, to specific persons or to individuals selected on the
basis of specific characteristics or procedures. "Organized action" is (a)
either the staff's action, which is legitimated by its executive or represent-
ative powers and oriented to realizing the organization's order, or (b)
the members' action as directed by the staff. 27

1. It is terminologically indifferent whether the relationship is of a
communal or associative character. It is sufficient for there to be a per-
son or persons in authority — the head of a family, the executive com-
mittee of an association, a managing director, a prince, a president, the
head of a church — whose action is concerned with carrying into effect
the order governing the organization. This criterion is decisive because
it is not merely a matter of action which is oriented to an order, but
which is specifically directed to its enforcement. Sociologically, this adds
to the concept of a closed social relationship a further element, which is
of far-reaching empirical importance. For by no means every closed com-
munal or associative relationship is an organization. For instance,_ this is

12 ] ^ The Organization 4 9

not true of an erotic relationship or of a kinship group without a head.

2. Whether or not an organization exists is entirely a matter of the
presence of a person in authority, with or without an administrative staff.
More precisely, it exists so far as there is a probability that certain persons
wii' act in such a way as to carry out the order governing the organiza-
tion; that is, that persons are present who can be counted on to act in
this way whenever the occasion arises. For purposes of definition, it is
indifferent what is the basis of the relevant expectation, whether it is a
case of traditional, affectual or value-rational devotion (such as feudal
fey'ty, loyalty to an officer or to a service). It may, on the other hand,
be a matter of expediency, as, for instance, a pecuniary interest in the
attached salary. Thus, for our purposes, the organization does not exist
ap:\n from the probability that a course of action oriented in this way
wiSi take place. If there is no probability of this type of action on the
part of a particular group of persons or of a given individual, there is in
shiest ten ns only a social relationship. On the other hand, so long as
there is a probability of such action, the organization as a sociological
phenomenon continues to exist, in spite of the fact that the specific
individuals whose action is oriented to the order in question, may have
been completely changed. The concept has been defined intentionally
to include precisely this phenomenon.

3. It is possible (a) that, in addition to the action of the adminis-
trative staff itself or that which takes place under 'its direction, there
may be other cases where action of the participants is intended to up-
hold the authority of the order; for instance, contributions or 'liturgies,"
that is, certain types of personal services, such as jury service or military
service. It is also possible (b) for the order to include norms to which it
is expected that the action of the members of an organization will be
oriented in respects other than those pertaining to the affairs of the
organization as a unit. For instance, the law of the state includes rules
governing private economic relations which are not concerned with the
enforcement of the state's legal order as such, but with action in the
service of private interests. This is true of most of the "civil" law. In
the first case (a) one may speak of action oriented to organizational
affairs (verbandsbezogenes Handeln); in the second (b) of action sub-
ject to the organization's regulation (verbandsgeregeltes Handeln). It
is only in the cases of the action of the administrative staff itself and of
that deliberately directed by it that the term "organized action" (Ver-
bandskandeln) will be used. Examples of such action would be partici-
pation in any capacity in a war fought by a state, or a motion which is
passed by the members at the behest of its executive committee, or a
contract entered into by the person in authority, the validity of which is
imposed ,m all members and for which they are held responsible (cf.
section 11). Further, all administration of justice and administrative
procedure belongs in this category (cf. section 14).

An organization may He (a) autonomous or heteronomous, (b) auto-
sphiilous cr heterocephalous. Autonomy means that the order governing

J O BASIC SOCIOLOGICAL TERMS [ Ch, I

the organization has been established by its own members on their own
authority, regardless of how this has taken place in other respects. In the
case of heteronomy, it has been imposed by an outside agency. Auto-
cephaly means that the chief and his staff are selected according to the
autonomous order of the organization itself, not, as in the case of hetero-
cephaly, that they are appointed by outsiders. Again, this is regardless
of any other aspects of the relationship.

A case of heterocephaly is the appointment of the governors of the
Canadian provinces by the central government of the Dominion. It is
possible for a heterocephalous group to be autonomous and an auto-
cephalous group to be heteronomous. It is also possible in both respects
for an organization to have both characters at the same time in different '
spheres. The member-states of the German Empire, a federal state, were
autocephalous. But in spite of this, within the sphere of authority of the
Reich, they were heteronomous; whereas, within their own sphere, in
such matters as religion and education, they were autonomous. Alsace-
Lorraine was, under German jurisdiction, in a limited degree autono-
mous, but at the same time heterocephalous in that the governor was
appointed by the Kaiser. All those elements may be present in the same
situation to some degree. An organization which is at the same time
completely heteronomous and completely heterocephalous is usually
best treated as a "part" of the more extensive group, as would ordinarily
be done with a "regiment" as part of an army. But whether this is the
case depends on the actual extent of independence in the orientation
of action in the particular case. For terminological purposes, it is entirely
a question of convenience.

1 3 , Consensual and Imposed Order in Organizations

An association's enacted order may be established in one of two ways:
by voluntary agreement, or by being imposed and acquiesced in. The
leadership in an organization may claim a legitimate right to impose new
rules. The "constitution" of an organization is the empirically existing
porbability, varying in extent, kind and conditions, that rules imposed
by the leadership will be acceded to. The existing rules may specify that
certain groups or sections of the members must consent, or at least have
been heard. Besides this, there may be any number of other conditions.

An organization's order may be imposed not only on its members hut
also on certain non-members. This is especially true of persons who are
linked to a given territorial area by virtue of residence, birth, or the per-
formance of certain actions. In this case the order possesses "territorial
validity" (Gebietsgeltung). An organization which imposes its order in
principle on a territory will be called a "territorial organization" (Gebiets-

13 ] Consensual and Imposed Order in Organizations 5 1

verband). This usage will be employed regardless of how fat the claim
to the validity of its order over its own members is also confined to
matters pertaining to the area. (Such a limitation is possible 28 and indeed
occurs to some extent.)

1. In our terminology, an order is always "imposed" to the extent
that it does not originate fromta voluntary personal agreement of all the
individuals concerned. The concept of imposition hence includes "ma-
jority rule," in that the minority must submit. For that reason there
have been long periods when the legitimacy of majority rule has either
not been recognized at all, or been held doubtful. This was true in the
case of the Estates of the Middle Ages, and in very recent times, in
the Russian obshchina. (This will he further discussed in the Sociology
of Law and of Domination.)

2. Even in cases where there is formally voluntary agreement, it is
very common, as is generally known, for .there to be a large measure of
imposition. (This is true of the obshchina.') In that case, it is he actual
state of affairs which is decisive for sociological purposes.

3. The concept of constitution made use of here is that also used by
Lassalle. It is not the same as what is meant by a "written" constitution,
or indeed by "constitution" in any sort of legal meaning. 29 The only
relevant question for sociological purposes is when, for what purposes,
and within what limits, or possibly under what special conditions (such
as the approval of gods or priests or the consent of electors), the mem-
bers of the organization will submit to the leadership. Furthermore,
under what circumstances the administrative staff and the organized
actions of the group will be at the leadership's disposal when it issues
orders, in particular, new rules.

4. The major cases of the territorial imposition of an order are
criminal law and various other legal rules the applicability of which
depends on whether the actor was resident, born, performed or com-
pleted the action within the area controlled by a political organization.
(Compare the concept of the "territorial corporate organization" —
Gebietskorpersckaft — as used by Gierke and Preuss.) 30

1 4 . Administrative and Regulative Order

Rules which govern organized action constitute an administrative
order (Verwaltungsordnung). Rules which govern other kinds of social
action and thereby protect the actors' enjoyment of the resulting benefits
will be called a regulative order (.Regulierungsordnung). So far as an
organization is solely oriented to the first type, it will be called an ad-
ministrative organization; so far as it is oriented to the second type, a
regulative organization.

5 1 BASIC SOCIOLOGICAL TERMS [ Ck. I

i. It goes without saying that the majority of actual organizations
partake of both characteristics. An example of a merely regulative or-
ganization would be a theoretically conceivable state based purely on
the upholding of public order (Rechtsstaat) and committed to absolute
laissez-faire. (This would imply that even the control of the monetary
system was left to private enterprise.)

2. On the concept of organized action see above, sec. 12:3, Under
the concept of administrative order would be included, all the rules
which govern not only the action of the administrative'staff, but also
that of the members in their direct relation to the organization; hence
these rules pertain to those goals the pursuit of which the administrative
order seeks to facilitate through prescribed and coordinated action on
the part of the administrative staff and the members. In a completely
communist economy almost all social action would be of this character.
In an absolute laissez-faire state (Rechtsstaai) only the functions of
judges, police authorities, jurors and soldiers, and activity as legislator
and voter would be included. The distinction between administrative
and regulative order coincides in its broad lines, though not always in
detail, with the distinction between public and private law. (AH further
details are treated in the Sociology of Law.)

15. Enterprise, Formal Organization, Voluntary and
Compulsory Association

Continuous rational activity of a specified kind will be called an
enter-prise; an association with a continuously and rationally operating
staff will be called a formal organization.

An organization which claims authority only over voluntary members
will be called a voluntary association (Verein); an organization which
imposes, within a specifiable sphere of operations, its order (with relative
success) on all action conforming with certain criteria will be called a
compulsory organization or association QAnstalt).

1. The concept of the enterprise covers business conducted by
political and ecclesiastic organizations as well as by voluntary associa-
tions insofar as it has rational continuity.

2. Voluntary as well as compulsory associations are organizations
with rationally established rules. More correctly, insofar as an organiza-
tion has rational)- established rules, it is either a voluntary or a com-
pulsory association. Compulsory organizations are, above all, the state
with its subsidiary heterocephalous organizations, and the church insofar
as its order is rationally established. The order governing a compulsory
association claims to be binding on all persons to whom the particular
relevant criteria apply — such as birth, residence, or the use of certain
facilities. It makes no difference whether the individual joined volun-

15 ] _ Enterprise, Formal Organization, Association 5 3

tarily; nor does it matter whether he has taken any part in establishing
the order. It is thus a case of imposed order in the most definite sense.
Compulsory associations are frequently territorial organizations.

3. The distinction between voluntary and compulsory associations is
relative in its empirical application. The rules of a voluntary association
may affect the interests of non-members, and recognition of the validity
of these rules may be imposed upon them by usurpation and the exer-
cize of naked power, but also by legal regulation, as in the case of the
law governing corporate securities.

4. It is hardly necessary to emphasize that the concepts of voluntary
and compulsory associations are by no means exhaustive of all conceiv-
able types of organizations. Furthermore, they are to be thought of as
polar types, as are sect and church in the religious sphere.

1 6 . Power and Domination

A. "Power" (Macfet) is the probability that one actor within a social
relationship will be in a position to carry out his own will despite resist-
ance, regardless of the basis on which this probability rests.

B. "Domination" (Herrscfcaft)" is the probability that a command
with a given specific content will be obeyed by a given group of persons.
"Discipline" is the probability that by virtue of habituation a command
will receive prompt and automatic obedience in stereotyped Forms, on
the part of a given group of persons."

1. The concept of power is sociologically amorphous. All conceiv-
able qualities of a person and all conceivable combinations of circum-
stances may put him in a position to impose his will in a given situa-
tion. The sociological concept of domination must hence be more precise
and can only mean the probability that a command will be obeyed.

2, The concept of discipline includes the habituation characteristic
of uncritical and unresisting mass obedience.

C. The existence of domination turns only on the actual presence
of one person successfully issuing orders to others; it does not necessarily
imply either the existence of an administrative staff or, for that matter,
of an organization. It is, however, uncommon to find it unrelated to at
least one of these. A "ruling organization" (Herrschaftsverband') exists
insofar as its members are subject "to domination by virtue of the estab-
lished order.

1. The* head of a household rules without an administrative staff. A
Bedouin chief, who levies contributions from the caravans, persons and
shipments which pass his stronghold, controls this group of changing
individuals, who do not belong to the same organization, as soon and as

5 4 BASIC SOCIOLOGICAL TERMS [ Ck. I

long as they face the same situation; but to do this, he needs a follow-
ing which, on the appropriate occasions, serves as his administrative staff
in exercising the necessary compulsion. (However, it is theoretically
conceivable that th'S type of control is exercised by a single individual.)
2. If it possesses an administrative staff, an organization is always to
some degree based on domination. But the concept is relative. In gen-
eral, an effectively ruling organization is also an administrative one. The
character of the organization is determined by a variety of factors: the
mode in which tli^ administration is carried out, the character of the
personnel, the objects over which it exercises control, and the extent of
effective jurisdiction. The first two factors in particular are dependent in
the highest degree on the way in which domination is legitimized (see
ch. III).

ly. Political and Hierocratic Organizations

A "ruling organization" will be called "political" insofar as its exist*
ence and order is continuously safeguarded within a given territorial area
by the threat and application of physical force on the part of the adminis-
trative staff. A compulsory political organization with continuous opera-
tions (politischer Anstaltsbetrieb') will be called a "state" insofar as its
administrative staff successfully upholds the claim to the monopoly of
the legitimate use of physical force in the enforcement of its order. Social
action, especially organized action, will be spoken of as "politically
oriented" if it aims at exerting influence on the government of a political
organization; especially at the appropriation, expropriation, redistribution
or allocation of the powers of government.

A "hierocratic organization" is an organization which enforces its
order through psychic coercion by distributing or denying religious
benefits ("hierocratic coercion"). A compulsory hierocratic organization
will be called a "church" insofar as its administrative staff claims a
monopoly of the legitimate use of hierocratic coercion.

i. It goes without saying that the use of physical force CGewaltsam-
fceit) is neither the sole, nor even the most usual, method of administra-
tion of political organizations. On the contrary, their heads have em-
ployed all conceivable means to bring about their ends. But, at the same
time, the threat of force, and in the case of need its actual use, is the
method which is specific to political organizations and is always the last
resort when others have failed. Conversely, physical force is by no means
limited to political groups even as a legitimate method of enforcement.
It has been freely used by kinship groups, household groups, consocia-
tions and, in the Middle Ages, under certain circumstances by all those
entitled to bear arms. In addition to the fact that it uses, among other

ij ] Political and Hierocratic Organizations 5 5

means, physical force to enforce its system of order, the political organiza-
tion is further characterized by the fact that the authority of its adminis-
trative staff is claimed as binding within a territorial area and this claim
is upheld by force. Whenever organizations which make use of force
are also characterized by the claim to territorial jurisdiction, such as
village communities or even some household groups, federations of
guilds or of workers' associations ("soviets"), they are by definition to
that extent political organizations.

2. It is not possible to define a political organization, including the
state, in terms of the end to which its action is devoted. All the way
from provision for subsistence to the patronage of art, there is no con-
ceivable end which some political association has not at some time pur-
sued. And from the protection of personal security to the administration
of justice, there is none which all have recognized. Thus it is possible
to define the "political" character of an organization only in terms of the
means peculiar to it, the use of force. This means is, however, in the
above sense specific, and is indispensable to its character. It is even,
under certain circumstances, elevated into an end in itself.

This usage does not Exactly conform to everyday speech. But the lat-
* ter is too inconsistent to be used for technical purposes. We speak of the
foreign currency policy" of a central bank, the financial policy of an
association, or the educational ■policy of a local authority, and mean the
systematic treatment and conduct of particular affairs. It comes consid-
erably closer to the present meaning when we distinguish the "political"
aspect or implication of a question. Thus there is the "political" official,
the "political" newspaper, the "political" revolution, the "political"
club, the "political" party, and the "political" consequences of an
action, as distinguished from others such as the economic, cultural, or
religious aspect of the persons, affairs or processes in question. In this
usage we generally mean by "political," things that have to do with
relations of authority within what is, in the present terminology, a
political organization, the state. The reference is to things which are
likelyto uphold, to change or overthrow, to hinder or promote, these
authority relations as distinguished from persons, things, and processes
which have nothing to do with it. This usage thus seeks to bring out
the common features of domination, the way it is exercised by the state,
irrespective of the ends involved. Hence it is legitimate to claim that the
definition put forward here is only a more precise formulation of what
is meant in everyday usage in that it gives sharp emphasis to what is
most characteristic of this -means: the actual or threatened use of force.
It is, of course, true that everyday usage applies the term "political,"
not only to groups which are the direct agents of the legitimate use of
force itself, but also to other, often wholly peaceful groups, which at-
tempt to influence the activities of the political organization. It seems
best for present purposes to distinguish this type of social action, "politi-
cally oriented" action, from political action as such, the actual organized
action of political groups.

5 6 BASIC SOCIOLOGICAL TERMS [ Ch. 1

3. Since the concept of the state has only in modern times reached
its full development, it is best to define it in terms appropriate to the
modern type of state, but at the same time, in terms which abstract from
the values of the present day, since these are particularly subject to
change. The primary formal characteristics of the modern state are as
follows: It possesses an administrative and legal order subject to change
by legislation, to which the organized activities of the administrative
staff, which are also controlled by regulations, are oriented. This sys-
tem of order claims binding authority, not only over the members of
the state, the citizens, most of whom have obtained membership by
birth, but also to a very large extent over all action taking place in the
area of its jurisdiction. It is thus a compulsory organization with a ter-
ritorial basis. Furthermore, today, the use of force is regarded as legiti-
mate only so far as it is either permitted by the state or prescribed by it.
Thus the right of a father t<? discipline his children is recognized — a
survival of the former independent authority of the head of a household,
which in the right to use force has sometimes extended to a power of
life and death over children and slaves. The clsim of the modern state
to monopolize the use of force is as essential to it as its character of
compulsory jurisdiction and of continuous operation,

4. In formulating the concept of a hierocratic organization, it is not
possible to use the character of the religious benefits it offers, whether
worldly or other-worldly, material or spiritual, as the decisive criterion.
What is important is rather the fact that its control over these values can
form the basis of a system of spiritual domination over human beings.
What is most characteristic of the church, even in the common usage
of the term, is the fact that it is a rational, compulsory association with
continuous operation and that it claims a monopolistic authority. It is
normal for a church to strive for complete control on a territorial basis
and to attempt to set up the corresponding territorial or parochial or-
ganization. So far as this takes place, the means by which this claim to
monopoly is upheld will vary From case to case. But historically, its
control over territorial areas has not been nearly so essential to the
church as to political associations; and this is particularly true today. It
is its character as a compulsory association, particularly the fact that one
beomes a member of the church by birth, which distinguishes the
church from a "sect." It is characteristic of the latter that it is a volun-
tary association and admits onlv persons with specific religious qualifi-
cations. (This subject will be further discussed in the Sociology of Reli-
gion.)

NOTES

Unless otherwise noted, all notes in this chapter are by Talcott Parsons.
For Parsons' exposition and critique of Weber's methodology, see his introduction
to The Theory of Social and Economic Organization and his Structure of Social
Action.

Notes 5 7

i. "Uber einige Kategoiien der verstehenden Soziologie," originally in
Logos, IV, 1 91 3, 253ft; reprinted in GAzW, 427-74. However, the reader should
be aware from the very beginning that Part Two below, the older and major body of
the manuscript, follows the terminology of this essay. For some of the relevant ter-
minology, see Appendix I. CR)

2. It has not seemed advisable to attempt a rigorous use of a single English
term whenever Weber employs Verstehen. "Understanding" has been most com-
monly used. Other expressions such as "subjectively understandable," "interpreta-
tion in subjective terms," "comprehension," etc., have been used from time to
time as the context seemed to demand.

3. In this series of definitions Weber employs several important terms which
need discussion. In addition to Verstehen, which has already been commented
upon, there ore four important ones: Dettten, Sinn, Handeln, and Verhalten.
Deuten has generally been translated as "interpret." As used by Weber in this
context it refers to the interpretation of subjective states of mind and the meanings
which can be imputed as intended by an actor. Any other meaning of the word
"interpretation" is irrelevant to Weber's discussion. The term Sinn has generally
been translated as "meaning"; and its variations, particularly the corresponding
adjectives, sinnhaft, sinnvoll, smnfremd, have been dealt with by appropriately
modifying the term meaning. The reference here again is always to features of
the content of subjective states of mind or of symbolic systems which are ulti-
mately referable to such states of mind.

The terms Handeln and Verhalten are directly related. Verhalten is the
broader term referring to any mode of behavior of human individuals, regardless
of the frame of reference in terms of which it is analysed. "Behavior" has seemed
to be the most appropriate English equivalent. Handeln, on the other hand refers
to the concrete phenomenon of human behavior only insofar as it is capable of
"understanding." in Weber's technical sense, in terms of subjective categories.
The most appropriate English equivalent has seemed to he "action." This corre-
sponds to [Parsons'] usage in The Structure of Social Action and would seem
to be fairly well established. "Conduct" is also similar and has sometimes been
used. Deuten, Verstehen, and Sinn are thus applicable to human behavior only
insofar as it constitutes action or conduct in this specific sense.

4. Weber's text in Part One is organized in a manner frequently found in the
German academic literature of his day, in that he first lays down certain funda-
mental definitions and then proceeds to comment on them. These comments, which
apparently were not intended to be "read" in the ordinary sense, but rather serve
as reference material for the clarification and systematization of the theoretical
concepts and their implications, are in the German edition printed in a smaller
type; a convention which we have followed in the rest of Part One. However, while
in most cases the comments are relatively brief, under the definitions of "sociology"
and "social action" Weber wrote what are essentially methodological essays (sec.
1 :a-b), which because of their length we have printed in the ordinary type. (R)

5. Weber means by "pure type" what he himself generally called and what
has come to be known in the literature about his methodology as the "ideal type."
The reader may be referred for general orientation to Weber's own essay (to
which he himself refers below), "Die 'Objektivitat* soziahvissenschaftlicher Er-
kenntnis" (" 'Objectivity' in Social Science and Social Policy," in Max Weber:
The Methodology of the Social Sciences. Edward Shils and Henry Finch, trans,
and eds. (Glencoe: The Free Press, 1949), 50-113; originally published in
AfS, vol. 19, 1904, reprinted in GAzW, 146-214); to two works of Alexander von
Schelting, "Die logische Theorie der historischen Kultunvissenschaften von Max

5 8 BASIC SOCIOLOGICAL TERMS [ Ck. I

Weber," AfS, vol. 49, 1922, 623s and Max Webers Wissenschaftslehre, 1934;
Talcott Parsons, The Structure of Social Action (New York: McGraw-Hill,
i937)r ch. 16; Theodore Abel, Systematic Sociology in Germany, (New York:
Columbia University Press, 1929). [See now also Raymond Aron, German Soci-
ology, trans, by M. and T. Bottomore (New York: The Free Press of Glencoe,
1964), based on 2nd French ed. of 1950.]

6. This is an imperfect rendering of the German term Evidenz, for which,
unfortunately, there is no good English equivalent. It has hence been rendered in
a number of different ways, varying with the particular context in which it
occurs. The primary meaning refers to the basis on which a scientist or thinker
becomes satisfied of the certainty or acceptability o£ a proposition. As Weber him-
self points out, there are two primary aspects of this. On the one hand a conclu-
sion can be "seen" to follow from given premises by virtue of logical, mathemat-
ical, or possibly other modes of meaningful relation. In this sense one "sees" the
solution of an arithmetical problem or the correctness of the proof of a geometrical
theorem. The other aspect is concerned with empirical observation. If an act of
observation is competently performed, in a similar sense one "sees" the truth of
the relevant descriptive proposition. The term Evidenz does not refer to the process
of observing, but to the quality of its result, by virtue of which the observer feels
justified in affirming a given statement. Hence "certainty" has seemed a suitable
translation in some contexts, "clarity" in others, "accuracy" in still others. The
term "intuition" is not usable because it refers to the process rather than to he
result.

7. Weber here uses the term aktuelles Verstehen, which he contrasts with
erklarendes Verstehen. The latter he also refers to as motivationsmdssig. "Aktu-
ell" in this context has been translated as "observational." It is clear from Weber's
discussion that the primary criterion is the possibility of deriving the meaning of
an act or symbolic expression from immediate observation without reference to any
broader context. In erklarendes Verstehen, on the other hand, the particular act
must be placed in a broader context of meaning involving facts which cannot be
derived from immediate observation of a particular act or expression. ,

8. The German term is Sinnzusammenhang. It refers to aplurality of ele-
ments which form a coherent whole on the level of meaning. There are several
possible modes of meaningful relation between such elements, such as logical con-
sistency, the esthetic harmony of a style, or the appropriateness of means to an
end. In any case, however, a Sinnzusammenhang must fc» distinguished from a
system of elements which are causally interdependent. There seems to be no sin-
gle English term or phrase which is always adequate. According to variations in
context, "context of meaning," "complex of meaning," and sometimes "meaning-
ful system" have been employed.

9. The German is gemcinter Sinn. Weber departs from ordinary usage not
only in broadening the meaning of this conception. As he states at the end of the
present methodological discussion, he does not restrict the use of this concept to
cases where a clear self-conscious awareness of such meaning can be reasonably
attributed to every individual actor. Essentially, what Weber is doing is to formu-
late an operational concept. The question is not whether in a sense obvious to the
ordinary person such an intended meaning "really exists," but whether the con-
cept is capable of providing a logical framework within which scientifically impor-
tant observations can be made. The test of validity of the observations is not
whether their object is immediately clear to common sense, but whether the results
of these technical observations can be satisfactorily organized and related to those
of others in a systematic body of knowledge.

Notes 5 9

io. The above pa Mage is an exceedingly compact statement of Weber's theory
of the logical condition* of proof of causal relationship. He developed this most
fully in bis ewy on " 'Objectivity' in Social Science . . . ," op. tit. It is also dis-
cussed in Other p*rt* of GAzW. The best and fullest secondary discussion is to
be found in Scbelting'* book. Max Wehers Wissenschaftsiehre. There is a briefer
discussion in Parsons Structure of Social Action, cb. 16.

ii. See Eduard Meyer, Geschichte des Altertums, i<- si, vol. Ill, 420, 444fF,
and Weber's essay on "Critical Studies in the Logic of the Cultural Sciences," in
Shils and Finch, eds., op. tit., 1 1 3-188; also in GAzW, 21 5-90. (R)

1 2. The expression sinnhafte AdSquanz is one of the most difficult of Weber's
technical terms to translate. In most places the cumbrous phrase "adequacy on the
level of meaning" has had to be employed. It should be clear from the progress of
the discussion that what Weber refers to is a satisfying level of knowledge for the

Particular purposes of the subjective state of mind of the actor or actors. He is,
owever, careful to point out that causal adequacy involves in addition to this a
satisfactory correspondence between the results of observations from the subjec-
tive point of view and from the objective; that is, observations of the overt course
of action which can be described without reference to the state of mind of the
actor. For a discussion of the methodological problem involved here, see Structure
of Social Action, chaps. II and V.

r3. This is the first occurrence in Weber's text of the term Chance which he
uses very frequently. It is here translated by "probability," because he uses it as
interchangeable with Wahrschein1ichke.it. As the term "probability" is used in a
technical mathematical and statistical sense, however, it implies the possibility of
numerical statement. In most of the cases where Weber uses Chance this is out of
the question. It is, however, possible to speak in terms of higher and lower de-
grees of probability. To avoid confusion with the technical mathematical concept,
the term "likelihood" will often be used in the translation. It is by means of this
concept that Weber, in a biddy ingenious way, has bridged the gap between the
interpretation of meaning and the inevitably more complex facts of overt action.

14. The term "reincation" as used by Professor Morris Cohen in his book,
Reason and Nature, seems to fit Weber's meaning exactly. A concept or system of
concepts, which critical analysis can show to be abstract, is "reified" when it is
used naively as though it provided an adequate total description of the concrete
phenomenon in question. The fallacy of ' reification" is virtually another name
tor what Professor Whitehead has called "the fallacy of misplaced concreteness.''
See his Science and the Modern World.

15. See August Weismann, Die AUmacht der Naturzuchtung (Jena: Fischer,
1893); his opponent was probably Alexander Gotte 0840-1922), author of
Lekrbuch der Zoologie (Leipzig: Engelmann, 1902) and of Tierkunde (Stras-
bourg: Trttbner, 1904). (R)

16. In the above classification as well as in some of those which follow,
the terminology is not standardized either in German or in English. Hence,
just as there is a certain arbitrariness in Weber's definitions, the same is true of
any corresponding set of definitions in English. It should be kept in mind that
all of them are modes of orientation of action to patterns which contain a
normative element. "Usage" has seemed to be the most appropriate translation
of Branch since, according to Weber's own definition, the principal criterion is
that "it is done to conform with the pattern." There would also seem to be
good precedent for the translation of Sitte by "custom." The contrast with
fashion, which Weber takes up in his first comment, is essentially the same in
both languages. The term Interessenlage presents greater difficulty. It involves

6 O BASIC SOCIOLOGICAL TERMS { Ch. 1

two components: the motivation in terms of self-interest and orientation to the
opportunities presented by the situation. It has not seemed possible to use any
single term to convey this meaning in English and hence, a more roundabout
expression has had to be resorted to.

17. The term "convention" in Weber's usage is narrower than Branch. The
difference consists in the fact that a normative pattern to which action is
oriented is conventional only insofar as it is regarded as part of a legitimate
order, whereas the question of moral obligation to conformity which legitimacy
implies is not involved in "usage." The distinction is closely related to that of
W. G. Sumner between "mores" and "folkways." It has seemed best to retain
the English term closest to Weber's own.

18. It is, in a sense, the empirical reference of this statement which consti-
tutes the central theme of Weber's series of studies in the Sociology of Religion.
Insofar as he finds it possible to attribute importance to "ideas" in the determina- -
tion of action, the most important differences between systems of ideas are not
so much those in the degree of ration a iiza tion as in the direction which the
process of rationalization in each case has taken. This series of studies was left
uncompleted at his death, but all the material which was in a condition fit for
publication has been assembled in the three volumes of the Gesammelte
Aufsatze zur Religionssoziologie CGAzRS}.

19. It has'not been possible to identify this reference of Weber's. It refers
most probably to a projected conclusion which was never written,

20. The reader may readily become confused as to the basis of the following
classification, as compared with that presented in sec. 7. The first classification
is one of motives for maintaining a legitimate order in force, whereas the second
is one of motives for attributing legitimacy to the order. This explains the in-
clusion of self-interested motives in the 6rst classification, but not in the second.
It is quite possible, for instance, for irreligious persons to support the doctrine
of the divine right of kings, because they fee! that the breakdown of an order
which depends on this would have undesirable consequences. This is not, how-
ever, a possible motive on which to base a direct" sense of pcisona! mora! obliga-
tion to conform with the order. <

21. Rheinstein's emendation, see his edition, op. cii., 7. (R)

22. In 1745, Maurice de Saxc defeated the British under the Duke of
Cumberland even though he sustained heavy losses in the one-sided opening
round, (R)

23. A cautionary note is in order here: The definitions of conflict or struggle
(K<wnpf) and of power (section 16) have often been wrenched out of context
in discussions of Weber as a "power politician." The present section, however,
defines the varieties of con flic t, from the extreme case of violent, unlimited 3nd
unregulated struggle to peaceful and regulated competition. In fact, mere con-
flict and power are not Weber's major concern, which is rather with variously
regulated and legitimated actions and their group context. (R)

24. As Weber goes- on to explain, he uses Vergemeinschaftung and Ver«c-
selhchaftung in 3 continuous rather than a dichotomous sense, and thus main-
tains his critical distance from Tonnies' paired contrast of Gemeinschuft and
Geselhchaft. Similarly, Weber rejected Gierke's invidious contrast between
"cold-blooded" Roman law and "communal" Germanic law, even though he
started his career as a Germanist rather than a Romanist (R)

25. This is a reference to the Betriehsrcite which were formed in German
industrial plants during the Revolution of 1918-19 and were recognized in the
Weimar Constitution as entitled to representation in the Federal Economic

Notes 6 i

Council. The standard work in English is W. C. Guillebaud, The Works
Council. A German Experiment in Industrial Democracy (Cambridge University
Press, 1928),

26. Weber's term here is Nahrungsspielraum. The concept refets to the
scope of economic resources and opportunities on which the standard of living
of an individual or a group is dependent.. By contrast with this, Erwerbxfielrttum
is a similar scope of resources and economic opportunities seen from the point
of view of their possible role as sources of profit. The basic distinction implied in
this contrast is of central importance to Weber's analysis later on (see chapter
II, sec. 1 off.).

27. The term "corporate group" for Verband, as used by Parsons, is. open
to misunderstandings on both the common-sense and the historical level since
Weber's term includes more than cither economic groups or self-governing, often
professional bodies. Parsons' alternative term, "organized group," has been re-
tained. The term "organization" should be understood literally in the sense of a
group with an "organ," but not necessarily of a rationalized kind* the latter would
make it an "enterprise" or a "formal organization" (see sec. 15). — For Weber's
older definition of Verband and Verbandshandeln see Appendix I. (R)

28. The concept "objective possibility" (ofc/eJttive Moglichkeit) plays an
important technical role in Weber's methodological studies. According to bis
usage, a thing is "objectively possible" if it "makes sense" to conceive it as an
empirically existing entity. It is a question of conforming with the formal,
logical conditions. The question whether a phenomenon which is in this sense
"objectively possible" will actually be found with any significant degree of
probability or approximation, is a logically distinct question.

29. See Ferdinand I.assallc, "Ober Verfassungswesen" (1862), in Gesam-
melte Beden und Schriften, Eduard Bernstein, ed. (Berlin: Cassirer, 19:9), 7-62.

30. See Otto Gierke, Geschichte des deutschen Korperschaftsbegriffs (Berlin-.
Weidmann, 1873), 829; Hugo Preuss, Gemeinde, Staat, Reich ah Gcbii tshorper-
schaft (1889). Preuss, one of Gierke's pupils, exerted decisive influence on the
making of the Weimar constitution, to which Weber also contributed at about
the same time that he worked intermittently on these definitions. ( W and R)

. 31. In his translation Parsons pointed out that "the term Herrschaft has no
satisfactory English equivalent. The term "imperative control," however, as used
by N. S. Timashcff in his Introduction to the Sociology of Law is close to
Weber's meaning" (Parsons, ed., of. cit., 152). Therefore, he borrowed 1 this term
"for the most general purposes." At a later time. Parsons indicated that he now
preferred the term "leadership," For more specific purposes, however, he used the
, term "authority." In objecting to "domination" (as used by Bendix and Rhein-
stein/Shils) Parsons noted: "It is true to be sure that the term Herrschaft, which
in its most general meaning I should now translate as "leadership," implies that
a leader has power over his followers. But "domination" suggests that this fact,
rather than the integration of the collectivity, in the interest of effective func-
tioning (especially the integration of the crucial Verband or corporate group), is
the critical factor from Weber's point of view. I do not believe that the former
interpretation represents the main trend of Weber's thought, although he wis in
certain respects a "realist" m the analysis of power. The preferable inttrpietation,
as I see it, is represented especially by his tremendous emphasis on the importance
of legitimation. I should therefore wish to stick to my own decision to translate
legitime Herrschaft, which for Weber was overwhelmingly the most significant
case for general structural analysis, as authority.'" . Si'C T Parsons' review article

6 2 BASIC SOCIOLOGICAL TERMS [ Ch. I

of Reinhard Bendix, Max Weben An baeP^ctttci Portrait, in American Soda-
logical "Review, 15:5, i960, 752.)

I prefer the term domination in this section because Weber stresses die fact
of mem compliance with a command, which may be due to habit, a belief in
legitimacy, or to considerations of expediency. However, Weber emphasizes here
as later that, in addition to the willingness of subjects to comply with a command,
there is usually a staff, which again may act on the basis or habit, legitimacy or
self-interest. Sociologically, a Herrschaft is a structure of superordination and
subordination, of leaders and led, rulers and ruled; it is based on a variety of
motives and of means of enforcement. In ch. Ill, Weber presents a typology of
legitimate Hemchaft where the term "authority" is indeed feasible. However, in
ch. X, he deals extensively with both faces of Herrschaft- legitimacy and force. It
should he clear to the reader that both "domination'' and "authority" are "cor-
rect'* although each stresses a different component of Hemcfutft Moreover, in
Part Two a HetTscJwft is quite specifically the medieval setgnewie or manor or simi-
lar structures in patrimonial regimes. This is also the historical derivation of the
term. For a major, and sociologically valuable, study see Otto Brunnej, Land und
Herrsckaft: Grundfragen der temUmalen Verfassvngsgnckichu Ottmreichs hn
MitteUdier (Vienna, 1950). (R) .' ■'

31. For the earlier discussion of discipline, see Part Two, ch. XrV:«ii:i, "The
Meaningof Discipline." /

33. The German is DevisenpoUtik, Translation in this context is made more
difficult by the fact that the German language does not distinguish between
"politics" and "policy," Politik having both meanings. The remarks which Weber
makes about various kinds of policy would have been unnecessary, had he written
originally in English. .

CHAPTER XI

SOCIOLOGICAL CATEGORIES
OF ECONOMIC ACTION

Prefatory Note

' What foBoWtis not intended in any sense to be "economic theory."
Rather, it consistt&nly in an attempt to define certain concepts which
are frequently used and to analyze certain of the simplest sociological
relationships in the economic sphere. As in the first chapter, the procedure
here has-been determined entirely by consideratkMB of convenience. It
has proved possible entirely to avoid the controversial concept of "value." 1
The usage here, in the relevant sections on the division of labor [see sec.
isff.], has deviated from the tctminclogy of Karl Bucher only so far as
seemed necessary for the purposes of me present undertaking. For the
present all questions of dynamic process will be left out of account.

r. The Concept of Economic* Action

Action will be said to be "economicaHy oriented" so far as, according
to its subjective meaning, it is concerned with the satisfaction of a desire
, for "utilities" (JNutdetsttmgen), "Economic action" QVirtschaften) is
any peaceful exercise of an. actor's control over resources which is in its
main impulse oriented towards economic ends. "Rational economic ac-
tion" requires instrumental rationality in this orientation, that is, deliber-
ate planning. We will call autocephalous economic action an "economy"
(Wirtschaft), and an organized system of continuous economic action
an "economic establishment" ( Wirtschaftsbetrieb^.

i. It was pointed out above (ch. I, sec. i:b) that economic ac-
tion as such need not be social action.

[6 3 1

64 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. II

Xy The definition of economic action must be as general as possible
and must bring out the fact that a! I "economic" processes and objects are
characterized as such entirely by the meaning they have for human ac-
tion in such roles as ends, means, obstacles, and by-products. It is not,
however, permissible to express this by saying, as is sometimes done, that
economic action is a "psychic" phenomenon. The production of goods,
prices, or even the "subjective valuation" of goods, if they are empirical
processes, are far from being merely psychic phenomena. But underlying
this misleading phrase is a correct insight. It is a fact that these phenom-
ena have a peculiar type of subjective meaning. This alone defines the
unity of the corresponding processes, and this alone makes them accessi-
ble to subjective interpretation.

The definition of "economic action" must, furthermore, be formu-
lated in such a way as to include the operation of a modem business en-
terprise fun for profit. Hence the definition cannot be based directly on
"consumption needs" and the "satisfaction" of these needs, but must,
rather, start out on the one hand from the fact that there is a desire (de-
mand) for utilities (which is true even in the case of orientation to
purely monetary gains), and on the other hand from the fact that •pro-
vision is being made to furnish the supplies to meet this demand (which
is true even in the most primitive economy merely "satisfying needs,"
and regardless of how primitive and frozen in tradition the methods of
this provision are).

3. As distinguished from "economic action" as such, the term "eco-
nomically oriented action" will be applied to two types: (a) every action
which, though primarily oriented to other ends, takes account, in the
pursuit of them, of economic considerations; that is, of the consciously
recognized necessity for economic prudence. Or (b) that which, though
primarily oriented to economic ends, makes use of physical force as a^
means. It thus includes all primarily non-economic action and all non-
peaceful action which is influenced by economic considerations. "Eco-
nomic action", thus is a conscious, primary orientation to economic con-
siderations. It must he conscious, for what matters is not the objective
necessity of making economic provision, but the belief that is is neces-
sary. Robert Liefmann has rightly laid emphasis on the subjective un-
derstandable orientation of action which makes it economic action. He
is not, however, correct in attributing the contrary view to al! other au-
thors. 2

4. Every type of action, including the use of violence, may he eco-
nomically oriented. This is true, for instance, of war-h'ke action, such as
marauding expeditions and trade wars. Franz Oppenheimer, in particu-
lar, has rightly distinguished "economic" means from "political" means. 3
It is essential to distinguish the latter from economic action. The use of
force is unquestionablv very strongly opposed to the spirit of economic ac-
quisition in the usual sense. Hence the term "economic action" will not
be applied to the direct appropriation of goods by force and the direct
coercion of the other party by threats of force. It goes without saying, at

i ] _ The Concept of Economic Action 6 5

the same time, that exchange is not the only economic means, though it
is one of the most important. Furthermore, the formally peaceful provi-
sion for the means and the success of a projected exercise of force, as in
the case of armament production and economic organization for war, is
just as much economic action as any other.

Every rational course of political action is economically oriented with
respect to provision for the necessary means, and it is always possible for
political action to serve the interest of economic ends. Similarly, though
it is not necessarily true of every economic system, certainly the modem
economic order under modern conditions could not continue if its con-
trol of resources were not upheld by the legal compulsion of the state;
that is, if its formally "legal" rights were not upheld by the threat of
force. But the fact that an economic system is thus dependent on protec-
tion by force, does not mean that it is itself an example of the use of
force.

How entirely untenable it is to maintain that the economy, however
defined, is only a means, by contrast, for instance, with the state, be-
comes evident from the fact that it is possible to define the state itself
.only in terms of the means which it today monopolizes, namely, the use
of force. If anything, the most essential aspect of economic action for

Ectical purposes is the prudent choice between ends. This choice is,
vever, oriented to the scarcity of the means which are available or
could be procured for these various ends.

5. Not every type of action which is rational in its choice of means
will be called "rational economic action," or even "economic action" in
any sense; in particular, the term "economy" will be distinguished from
that of "technology."* The "technique" of an action refers to the means
employed as opposed to the meaning or end to which the action is, in
the last analysis, oriented. "Rational" technique is a choice of means
which is consciously and systematically oriented to the experience and
reflection of the actor, which consists, at the highest level of rationality,
in scientific knowledge. What is concretely to be treated as a "techni-
nique" is thus variable. The ultimate meaning of a concrete act may,
seen in the total context of action, be of a "technical" order; that is, it
, may be significant only as a means in this broader context. Then the
"meaning" of the concrete act (viewed from the larger context) lies in
its technical function; and,- conversely, the means which are applied in
order to accomplish this are its "techniques." In this sense there are
techniques of every conceivable type of action, techniques of prayer, of
asceticism, of thought and research, of memorizing, of education, of ex-
ercising political or hierocratic domination, of administration, of making
love, of making war, of musical performances, of sculpture and painting,
of arriving at legal decisions. AH these are capable of the widest varia-
tion in degree of rationality. The presence of a "technical question" al-
ways means that there is some doubt over the choice of the most rational
means to an end. Among others, the standard of rationality for a tech-
nique may be the famous principle of "least effort," the achievement of

66 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

an optimum in. the relation between the result and the means to be ex-
pended on it (and not the attainment of a result with the absolute min-
imum of means). Seemingly the same principle, of course, applies to
economic action — or to any type of rational action. But there it has a
different meaning. As long as the action is purely "technical" in the pres-
ent sense, it is oriented only to the selection of the means which, with
equal quality, certainty, and permanence of the result, are comparatively
most "economical" of effort in the attainment of a given end; compara-
tively, that is, insofar as there are at all directly comparable expenditures
of means in different methods of achieving the end. The end itself is
accepted as beyond question, and a purely technical consideration ig-
nores other wants. Thus, in a question of whether to make a technically
necessary part of a machine out of iron or platinum, a decision on tech-
nical grounds alone would, so long as the requisite quantities of both
metals for their particular purpose were available, consider only which
of the two would in this case best bring about the given result and
would at the same time minimize the other comparable expenditure of
resources, such as labor. But once consideration is extended to take ac-
count of the relative scarcity of iron and platinum in relation to their
potential uses, as today every technician is accustomed to do even in the
chemical laboratory, the action is ho longer in the present sense purely
technical, but also economic. From the economic point of view, "techni-
cal" questions always involve the consideration of "costs." This is a
question of crucial importance for economic purposes and in this con-
text always takes the form of asking what would be the effect on the
satisfaction of other wants if this particular means were not used for
satisfaction of one given want. The "other wants" may be qualitatively
different present wants or qualitatively identical future wants, (A simi- -
Iar position is taken by Friedrich von Gottl-Ottlilienfeld in Grundriss
der SoziaUfkonomik, Part II, 2; an extensive and very good discussion of
this issue in R. Liefmann, Grundsatze der VolkswirtschaftslehTe, vol. I
(3rd ed.), p. 3iiff. Any attempt to reduce all means to "ultimate ex-
penditures of labor" is erroneous.)

For the answer to the question, what is, in comparative terms, the
"cost" of using various means for a given technical end, depends in the
last analysts on their potential usefulness as means to other ends. This is
particularly true of labor. A technical problem in the present sense is,
for instance, that of what equipment is necessary in order to move loads
of a particular kind or in order to raise mineral products from a given
depth in a mine, and which of the alternatives is the most "suited," that
is, among other things, which achieves a given degree of success with
the least expenditure of effort. It is, on the other hand, an economic
problem whether, on the assumption of a market economy, these expen-
ditures will pay off in terms of money obtained through the sale of the
goods; or, -on the assumption of a planned economy, whether the nec-
essary labor and other means of production can be provided without
damage to the satisfaction of other wants held to be more urgent. In
both cases, it is a problem of the comparison of ends. Economic action

] The Concept of Economic Action 6 7

is primarily oriented to the problem of choosing the end to which a
thing shall be applied; technology, to the problem, given the end, of
choosing the appropriate means. For purposes of the theoretical (not, of
course, the practical) definition of technical rationality it is wholly in-
different whether the product of a technical process is in any sense use-
ful. In the present terminology we can conceive of a rational technique
for achieving ends which no one desires. It would, for instance, be possi-
ble, as a kind of technical amusement, to apply all the most modern
methods to the production of atmospheric air. And no one could take
the slightest exception to the purely technical rationality of the action.
Economically, on the other hand, the procedure would under normal
circumstances be clearly irrational because there would be no demand
for the product. (On all this, compare v. Gottl-OttHHenfeld, op. cit.)

The fact that what is called the technological development of mod-
em times has been so largely oriented economically to profit-making is
one of the fundamental facts of the history of technology. But however
fundamental it has been, this economic orientation has by no means
stood alone in shaping the development of technology. In addition, a
part has been played by the games and cogitations of impractical ideolo- i

gists, a part by otherworldly interests and all sorts of fantasies, a part by
preoccupation with artistic problems, and by various other non.-economic
motives. None the less, the main emphasis at all times, and especially
the present, has lain in the economic determination of technological
development. Had not rational calculation formed the basis of economic
activity, had there not been certain very particular conditions in its
economic background, rational technology could never haw come into
existence.

The fact that the aspects of economic orientation which distinguish
it from technology were not explicitly brought into the initial definition,
is a consequence of the sociological starting point. From a sociological
point of view, the weighing of alternative ends in relation to each other
and to costs is a consequence of "continuity." This is true at least so far
as costs mean something other than altogether giving up one end in ■■...

favor of more urgent ones. An economic, theory, on the other hand, vZ

would do well to emphasize this criterion from the start.

6. It is essential to include the criterion of power of control and dis-
posal (Verfugungsgewatt)* in the sociological concept of economic ac-
tion, if for no other reason than that at least a modern market economy
CErwerbswirtschaft) essentially consists in a complete network of ex- .
change contracts, that is, in deliberate planned acquisitions of powers of
control and disposal. This, in such an economy, Is the principal source
of the relation of economic action to the law. But any other type of or-
ganization of economic activities would involve some kind of de facte
distribution of powers of control and disposal, however different its un- «.
derlying principles might be from those of the modem private enterprise
economy with its legal protection of such powers held by autonomous
and autocephalous economic units. Either the central authority, as in the
case of socialism, or the subsidiary parts, as m anarchism, must be able

6 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11

to count on having some kind of control over the necessary services of
labor and of the means of production. It is possible to obscure this fact
by verbal devices, but it cannot be interpreted out of existence. For pur-
poses of definition it is a matter of indifference in what way this control
is guaranteed; whether by convention or by law, or whether it does riot
even enjoy the protection of any external sanctions at all, but its security
rests only on actual expectations in terms of custom or self-interest.
These possibilities must be taken into account, however essential legal
compulsion may be for the modem economic order. The indispensability
of powers of control for the concept of social action in its economic
aspects thus does not imply that legal order is part of that concept by
definition, however important it may be held to be on empirical
grounds.

7. The concept of powers of control and disposal will here be taken
to include the possibility of control over the actor's own labor power,
whether this is in some way enforced or merely exists in fact. That this
is not to be taken for granted is shown by its absence in the case of
slaves.

8. It is necessary for the purposes of a sociological theory of eco-
nomic action to introduce the concept of "goods" at an early stage, as is
done in sec. 1. For this theory is concerned with a type of action which
is given its specific meaning by the results of the actors' deliberations,
which themselves can be isolated only in theory [but cannot be observed
empirically]. Economic theory, the theoretical insights of which provide
the basis for the sociology of economic action, might (perhaps) be able
to proceed differently; the latter may find it necessary to create its own
theoretical constructs.

2. The Concept of Utility

By "utilities" (Nutzleisttmgen) will always be meant the specific and
concrete, real or imagined, advantages CChancen) of opportunities for
present or future use as they are estimated and made an object of specific
provision by one or more economically acting individuals. The action of
these individuals is oriented to the estimated importance of such utilities
as means for the ends of their economic action.

Utilities may be the services of non-human or inanimate objects or
of human beings. Non-human objects which are the sources of potential
utilities of whatever sort will be called "goods." Utilities derived from a
human source, so far as this source consists in active conduct, will be
called "services'* (Leistwtgcn). Social relationships which are valued as
a potential source of present or future disposal over utilities are, however,
also objects of economic provision. The opportunities of economic ad-
vantage, which are made available by custom, by the constellation of

2 ] The Concept of Utility 6 9 *

interest, or by a conventional or legal order for the purposes of an eco-
nomic unit, will be called "economic advantages."

On the following comments, compare E. von Bohm-Bawerk, Rechte
und Verhaltnisse vom Standfunkt der volkswirtschaftlichen Giiterlehre
(Innsbruck 1881).

1. The categories of goods and services do not exhaust those aspects
of the environment which may be important to an individual for eco-
nomic purposes and which may hence be an object of economic con-
cern. Such things as "good will," or the tolerance of economic measures
on the part of individuals in a position to interfere with them, and nu-
merous other forms of behavior, may have the same kind of economic
importance and may be the object of economic provision and, for in- ,

. stance, of contracts. It would, however, result in a Confusion of con-
cepts to try to bring such things under either of these two categories.
This choice of concepts is thus entirely determined by consideration of
convenience.

2. As Bohm-Bawerk has correctly pointed out, it would be equally
imprecise if all concrete objects of life and of everyday speech were

v without distinction designated as "goods," and the concept of a good
were then equated to that of a material utility. In the strict sense of
utility, it is not a "horse" or a "bar of iron" which is an economic "good,"
but the specific ways in which they can be put to desirable and practical
uses; for instance the power to haul loads or to carry weights, or some-
thing of the sort. Nor can we, in the present terminology, call goods '
such potential future advantages (Chancen') which appear as objects of
exchange in economic transactions, as "good will," "mortgage," "prop-
erty." Instead, for simplicity's sake, we shall call the services of such
potential powers of control and disposal over the utilities of goods and
services, promised or guaranteed by the traditional or legal order, "eco-
nomic advantages" (CfeoMceM) or simply "advantages" wherever this is
not likely to be misunderstood.

3. The fact that only active conduct, and not mere acquiescence,
permission, or omission, are treated as "services" is a matter of conven-
ience. But it must be remembered that it follows from this that goods
and services do not constitute an exhaustive classification of all econom-
ically significant utilities.

On the concept of 'labor," see below, sec. 15.

3 . Modes of the Economic Orientation of Action

Economic orientation may be a matter of tradition or of goal-oriented
rationality. Even in cases where there is a high degree of rationalization
of action, the element of traditional orientation remains considerable.
For the most part, rational orientation is primarily significant for "mana-
gerial" action, no matter under what form of organization. (See below,

7 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

sec. 15.) The development of rational economic action from the instinc-
tively reactive search for food or traditional acceptance of inherited
techniques and customary social relationships has been to a large extent
determined by non-economic events and actions, including those outside
everyday routine," and also by the pressure of necessity in cases of in-
creasing absolute or relative limitations on subsistence.

1. Naturally there cannot in principle be any scientific standard for
any such concept as that of an "original economic state." It would be
possible to agree arbitrarily to take die economic state on a given tech-
nological level, as, for instance, that characterized by the lowest devel-
opment of tools and equipment known to us, and to treat it and analyze
it as the most primitive. But; there is no scientific justification for con-
cluding from observations of living primitive peoples on a low techno-
logical level that the economic organization of all peoples of the past
with similar technological standing has been the same as, for instance,
that of the Vedda or of certain tribes of the Amazon region. For, from
a purely economic point of view, this level of technology has been just
as compatible with large-scale organization of labor as with extreme
dispersal in small groups (see below, sec. r6). It is impossible to infer
from the economic aspects of the natural environment alone, which of
these, would be more nearly approached. Various non-economic factors,
for instance, military, could make a substantial difference.

2. War and migration are not in themselves economic processes,
though particularly in early times they have been largely oriented to
economic considerations. At all times, nowewt, indeed up to the pres-
ent, they have often been responsible for radical changes in the eco-
nomic system. In cases where, through such factors as cOmatic changes,
inroads of sand, or deforestation, there has been an absolute decrease in ,
the means of subsistence, human groups have adapted themselves in
widely differing ways, depending on the structure of interests and on
the manner in which non-economic factors have played a role.* The typ-
ical reactions, however, have been s fall in the standard of living and
an absolute decrease i population. Similarly, in cases of relative impov-
erishment in means of subsistence, as determined by a given standard of
living and of the distribution of chances of acquisition, there have also
been wide variations. But on the whole, this type of situation has, more
frequently than the other, been met by the increasing rationalization of
economic activities. Even in this case, however, it is not possible to make
general statements. So far as the "statistical" information can be relied
upon, there was a tremendous increase of population In China after the
beginning of the eighteenth century, but it had exacdy the opposite
effect from the similar phenomenon of about the same time in Europe.

It is, however, possible to say at least something about the reasons for
this (see below, sec, n.). The chronic scarcity of the means of subsist-
ence in the Arabian desert has only at certain times resulted in a change
in the economic and political structure, and these changes have been

3 ] Modes of Economic Orientation of Action 7 1

most prominent when non-economic Creligious) developments have
played a part.

3. A high degree of traditionalism in habits of life, such as charac-
terized the laboring classes in early modem times, has not prevented a
great increase in the rationalization of economic enterprise under capi-
talistic direction. But it was also compatible with, for instance, the ration-
alization of public finances in Egypt on a state-socialistic model. Nev-
ertheless, this traditionalistic attitude had to be at least partly overcome
in the Western World before the further development to the specifically
modem type of rational capitalistic economy could take place.

4. Tyfical Measures of Rational Economic Action

The following are typical measures of rational economic action:

(1) The systematic Allocation as between present and future of util-
ities, on the control of which the actor for whatever reason feels able to
count. (These are the essential features of saving.)

(2) The systematic allocation of available utilities to various potential
uses in the order of their estimated relative urgency, ranked according to
the principle of marginal utility.

These two cases, the most definitely "static," have been most highly
developed in times of peace. Today, for the most part, they take the form
of the allocation of money incomes.

■ (3) The systematic procurement* through production or transporta-
tion of such utilities for which all the necessary means of production are
controlled by the actor himself. Where action is rational, this type of
action will take place so far as, according to the actor's estimate, the
urgency of his demand for the expected result of the action exceeds the
necessary expenditure, which may consist in (a) the irksomeness of the
requisite labor services, and (b) the other potential uses to which the
requisite goods could be put; including, that is, the utility of the potential
alternative products and'their uses. This is "production" in the broader
sense, which includes transportation.

(4) The systematic acquisition, by agreement (VergeseUschaftung)
with the present possessors or with competing bidders, of assured powers
of control and disposal over utilities. The powers of control may or may
not be shared with others. The occasion may lie in the fact that utilities
themselves are in the control of others, that their means of procurement
are in such control, OX that third persons desire to acquire them in such
a way as to endangeflfhe actor's own supply.

The relevant rational association (Vergeselhckaftung) with the
present possessor of a power of .control or disposal may consist in (a) the

7 2 SOCIOLOGICAL- CATEGORIES OF ECONOMIC ACTION [ Ch. 11

establishment of an organization with, an order to which the procurement
and use of utilities is to be oriented, or (b) in exchange. In the first case
the purpose of the organization may be to ration the procurement, use, or
consumption, in order to limit competition of procuring actors. Then it
is a "regulative organization." Or, secondly, its purpose may be to set
up a unified authority for the systematic administration of the utilities
which had hitherto been subject to a dispersed control. In this case there
is an "administrative organization."

"Exchange" is a compromise of interests on the part of the parties in
the course of which goods or other advantages are passed as reciprocal
compensation. The exchange may be traditional or conventional, 8 and
hence, especially in the latter case, not economically rational. Or, sec-
ondly, it may be economically rational both in intention and in result.
Every case of a rationally oriented exchange is the resolution of a pre-
viously open or latent conflict of interests by means of a compromise. The
opposition of interests which is resolved in the compromise involves the
actor potentially in two different conflicts. On the one hand, there is the
conflict over the price to be agreed upon with the partner in exchange;
the typical method is bargaining. On the other hand, there may also he
competition with actual or potential rivals, either in the present or in the
future, who are competitors in the same market. Here, the typical method
is competitive bidding and offering.

i. Utilities, and the goods or labor which are their sources, are un-
der the control (Eigenverfugung) of an economically acting individual
if he is in a position to be able in fact to make use of them at his con-
venience Cat least, up to a point) without interference from other per-
sons, regardless of whether this ability rests on the Bfcal order, on con-
vention, on custom or on a complex of interests. It is by no means true
that only the legal assurance of powers of disposal is decisive, either for
the concept or in fact. It is, however, today empirically an indispensable
basis for economic activitiy with the material means of production.

2. The fact that goods are not as yet consumable may be a result of
the fact that while they are, as such, finished, they are not yet in a suit-
able place for consumption; hence the transportation of goods, which
is naturally to be distinguished from trade, a change in the control over
the goods, may here be treated as part of the process of production.

3. When there is a lack of control (Eigenverfugung) over desired
utilities, it is in principle indifferent whether the individual is typically
prevented from forcibly interferir^j|with the control of others by a legal
order, convention, custom, his own 1 self-interest, or his consciously-held
moral standards.

4. Competition in procurement may exist under the most various
conditions. It is particularly important when supplies are obtained by
seizure, .as in hunting, fishing, lumbering, pasturage, and clearing new

4 I Typical Measures of Rational Economic Action 7 3

land. It may also, and most frequently does, exist within an organization
which is closed to outsiders. An order which seeks to restrain such
competition then always consists in the rationing of supplies, usually
combined with the appropriation of the procurement possibilities thus
guaranteed for the benefit of a limited number of individuals or, more
often, households. AH medieval Mark- and fishing associations, the reg-
ulation of forest clearing, pasturage and wood gathering rights in the
common fields and wastes, the grazing rights on Alpine meadows, and
so on, have this character. Various types of hereditary property-rights in
land owe their development to this type of regulation,

5. Anything which may in any way be transferred from the control
of one person to that of another and for which another is willing to give
compensation, may be an object of exchange. It is not restricted to goods
and services, but includes all kinds of potential ecpnomic advantages; for
instance., "good will," which exists only by custom or self-interest and
cannot be enforced; in particular, however, it includes all manner of ad-
vantages, claims to which are enforceable under some kind of order.
Thus objects of exchange are not* necessarily presently existing utilities.

For present purposes, by "exchange" in the broadest sense will be
meant every case of a formally voluntary agreement involving the offer
of any sort of present, continuing, or future utility in exchange for util-
ities of any sort offered in return. Thus it includes the turning over of
the utility of goods or money in exchange for the future return of the
same kind of goods. It also includes any sort of permission for, or toler-
ance of, the use of an object in return for "rent" or "hire," or the hiring
of any kind of services forNvages or salary. The fact that the last exam-
ple today involves, from a sociological point of view, the subjection of
the "worker," as defined in sec. 15 below, under a form of domination
will, for preliminary purposes, be neglected, as will the distinction be-
tween loan and purchase.

6. The conditions of exchange may be traditional, partly traditional
though enforced by convention, or rational. Examples of conventional
exchanges are exchanges of gifts between friends, heroes, chiefs, princes;
as, for instance, the exchange of armor between Diomedes and Glaucos.
It is not uncommon for these to be rationally oriented and controlled
to a high degree, as can be seen in the Tell-el-Amarna documents.
Rational exchange is only possible when both parties expect to profit
from it, or when one is under compulsion because of his own need or
the other's economic power. Exchange may serve either purposes of
consumption or of acquisition (see below, sec. 1 1). It may thus be ori-
ented to provision for the personal use of the actor or to opportunities
for profit. In the first case, its conditions are to a large extent differenti-
ated from case to case, and it is in this sense irrational. Thus, for in-
stance, household surpluses will be valued according to the individual
marginal utilities of the particular household economy and may on oc-
casion be sold very cheaply, and the fortuitous desires of the moment
may establish the marginal utility of goods which are sought in ex-

7 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

change at a very high level. Thus the exchange ratios, as determined by
marginal utility, wul fluctuate widely. Rational competition develops
only in the case o£ "marketable goods" Csee sec. 8) and, to the highest
degree, when goods are used and sold in a profit system Csee sec. 1 0.

7. The modes of intervention of a regulatory system mentioned above
under point (4) are not the only possible ones, but merely those which
are relevant here because they are the most immediate consequences of
a tightening of the supply basis. The regulation of marketing processes
will be discussed below.

5. Types of Economic Organizations

According to its relation to the economic system, an economically
oriented organization may be: (a) an "economically active organization"
Cwirtschaftender Verhand) if the primarily non-economic organized ac-
tion oriented to its order includes economic action; (b) an "economic
organization" (WirtsckaftsverbaneO if its organized action, as governed
by the order, is ■pn-marily autocephalous economic action of a given kind;
(c) an "economically regulative organization" (yrirtschaftsreguHerender
VerbancT) if the autocephalous economic activity of the members is
directly oriented to the order governing the group; that is, if economic
action is heteronomous in that respect; (d) an "organization enforcing
a formal order" (Ordnungsverband)* if its order merely guarantees, by
means of formal rules, the autocephalous and autonomous economic
activities of its members and the corresponding economic advantages thus
acquired.

1. The state, except for the socialistic or communist type, and all
other organizations like churches and voluntary associations are econom-
ically active groups if they manage their own financial affairs. This is
also true of educational institutions and all other organizations which
are not primarily economic.

2. In the category of "economic organizations" in the present sense
are included not only business corporations, co-operative associations,
cartels, partnerships, and so on, but all permanent economic establish-
ments (Brtrfefee) which involve the activities of a plurality of persons, all
the way from a workshop run by two artisans to ft conceivable commu-
nistic organization of the whole world.

3. "Economically regulative organizations" are the following: medi-
eval village associations, guilds, trade unions, employers' associations,
cartels, and all other groups, the directing authorities of which carry
on an "economic policy" which seeks tf regulate both the ends and the
procedures of economic activity. It thus includes the villages and towns
of the Middle Ages, just as much as a modem state which follows such
apolky.

5 ] Types of Economic Organizations 7 5

4. An example of a group confined to the "enforcement of a formal
order" is the pure laissez-faire state, which would leave the economic
activity of individual households and enterprises entirely free and con-
fine its regulation to the formal function of settling disputes connected
with the fulfillment of free contractual obligations.

5. The existence of organizations "regulating economic activity" or
merely "enforcing a formal order" presupposes in principle a certain
amount of autonomy in the field of economic activity. Thus there is in
principle a sphere of free disposal over economic resources, though it
may he limited in varying degrees by means of rules to which the ac-
tors are oriented. This implies, further, the Cat least relative) appropri-
ation of economic advantages, over which the actors then have autono-
mous control; The purest type of a group "enforcing a formal order" is
thus present when all human action is autonomous with respect to
content, and oriented to regulation only with respect to form, and when
all non-human sources of utility are completely appropriated so that in-
dividuals can have free disposal of them, in particular by exchange, as
is the case in a modem property system. Any other kind of limitation on
appropriation and autonomy implies "regulation of economic activity,"
because it restricts the orientation of human activities.

6. The dividing line between "regulation of economic activity" and
mere "enforcement of a formal order" is vague. For, naturally, the type
of "formal" order not only may, but must, in some way also exert a
material influence on action; in some cases, a fundamental influence.
Numerous modem legal ordinances, which claim to do no more than
set up formal rules, are so drawn up that they actually exert a material
influence (see "Soc. of Law," Part Two; ch. VIII). Indeed, a really
s,trict limitation to purely formal rules is possible only in theory. Many
of the recognized "overriding" principles of law, of a kind which cannot
he dispensed with, imply to an appreciable degree important limitations
on the content of economic activity. Especially "enabling provisions"
can under certain circumstances, as in corporation law, involve quite
appreciable limitations on economic autonomy.

7. The limits of the material regulation of economic activity may
■ he reached when it results in (a) the abandonment of certain kinds of

economic activity, as when a tax on turnover leads to the cultivation of
land only for consumption; or 00 in evasion, in such cases as smug
gling, boodegging, etc.

6. Media of Exchange, Means of Payment, Money

A material object offered in exchange will be called a "medium of
exchange" so far as it is typically accepted primarily by virtue of the fact
that the recipients estimate that they will, within the relevant time hori-
zon, be able to utilize it in another exchange to procure other goods at an
acceptable exchange ratio, regardless of whether it is exchangable for

76 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

all other goods or only for certain specific goods, The probability that the
medium of exchange will be accepted at a given rate for specific other
goods will be called its "substantive val; lity" (materiale Gehung) in rela-
tion to these. The use itself will be cahed the "formal validity" {formate
Geltung}.

An object will be called a "means of payment" so far as its acceptance
in payment of specific agreed or imposed obligations is guaranteed by
convention or by law. This is the "formal validity" of the means of pay-
ment, which may also signify its formal validity as a means of exchange.
Means of exchange or of payment will be called "cbartal" Qchartaiy"
when they are artifacts which, by virtue of their specific form, enjoy a -
definite quantum, conventional or legal, agreed or imposed, of formal
. validity within the membership of a group of persons or within a ter-
ritorial area; and when (b) they are divisible in such a way that they
represent a particular unit of nominal value or a multiple or a fraction
of it, so that it is possible to use diem in arithmetical calculations.

"Money" we call a chartal means of payment which is also a means
of exchange.

An organization will be called a "means of exchange," "means of
payment," or "money" group insofar as it effectively imposes within the
sphere of authority of its orders the conventional or legal (tormol)
validity of a means of exchange, of payment, or money; these will be
termed "internal", means of exchange, etc. Means used in transactions
with non-members will be called "external" means of exchange.

Means of exchange or of payment which are not chartal are "natural",
means. They may be differentiated (a) in technical terms, according to
their physical characteristic— they may be ornaments, clothing, useful
objects of various sorts — or according to whether their utilization occurs
in terms of weight or not. They may also (b) be distinguished economi-
cally according to whether they are used primarily as means of exchange
or for purposes of social prestige, the prestige of possession. They may
also be distinguished according to whether they are used as means of ex-
change and payment in internal or in external transactions.

Money, means of exchange or of payment are "tokens" so far as they
do not or no longer possess a value independent of their use as means of
exchange and of payment. They are, on the other hand, "material" means
so far as their value as such is influenced by their possible use for other
purposes, or may be so influenced.

Money may consist either of coined or of note (document) money.
Notes are usually adapted to a system of coinage or have a name which is
historically derived from it.

(1) Coined money will be called "free" money or "market" money
so far as the monetary metal will be coined by the mint on thelnitiative

6 ] Media of Exchange, Means of Payment, Money 7 7

of any possessor of it without limit of amount. This means that in effect
the amount issued is determined hy the demand of parties to market
transactions.

(2) It will be called "limited" money or "administrative" money if
the transformation of the metal into its chartal form (coinage) is subject
to the formally quite arbitrary decisions of the governing authority of an
organization and is in effect primarily oriented to its fiscal needs,

(3) It will be called "regulated" money if, though its issue is limited,
the kind and amount of coinage is effectively subject to rules.

The term "means of circulation" will be applied to a document which
functions as "note" money, if it is accepted in normal transactions as "pro-
visional" money with the expectation that it can, at any time, be con-
verted into "definitive" money, that is into coins, or a given weight of
monetary metal. It is a "certificate" if this is assured by regulations which
require maintenance of stocks providing full coverage in coin or bullion.

We call "conversion scales" the conventional or legally imposed ex-
change ratios valid within an organization for the different "natural"
nieans of exchange or payment.

"Currency money" is the money which by the effective arrangements
within an organization has validity as a means of payment without limi-
tation on the amount that need he accepted. ''Monetary material" is the
material from which money is made; "monetary metal" is this material
in the case of market money. "Monetary value scale" we call the relative
valuation of the various subdivisions and denominations, consisting of
different material substances, of "note" or "administrative" money; the
same ratios in the case of types of market money made of different mc-uls
we call "exchange ratios."

"International" means of payment are those means of payment which
serve to balance accounts between different monetary systems, that is, so
far as payments are not postponed bv funding operations.

Every reform of the monetary system by an organization must neces-
sarily take account of the fact that certain means of payment have
previously been used for the liquidation of debts. It must cither accept as
legal their continued use as a means of payment, or impose new uiies. In
the latter case an exchange ratio must be established bctwcvii the old
units, whether natural, by weight, or chartal, and the new ones. This is
the principle of the so-called "historical" definition of money as a means
of payment. It is impossible here to discuss how far this reacts upon the
exchange relation between money as a means of exchange and goods.

It should be strongly emphasized that the present discussion is not
an essay in monetary theory, but only an attempt to work out the sim-
plest possible formulations of a set of concepts which will have to be

7 8 .SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. 11

frequently employed later on. In addition, this discussion is concerned
primarily- with certain very elementary sodohffcal consequences of the
use of money. The formulation of monetary theory, which has been
most acceptable to the author, is that of von Mises." The Stootlfcfee
Theorie des Geides by G. F. Knapp" is the most imposing work in the
field and in its way solves the formal problem brilliantly. It is, how-
ever, as will be seen below, incomplete for substantive monetary prob-
lems. Its able and valuable attempt to systematize terminology and con-
cepts will be left out of account at this point

i. Means of exchange and means of payment very often, though by
no means always, coincide empirically. They are, however, particularly
likely not to do so in primitive conditions. The means of payment for
dowries, tribute, obligatory gifts, fines, wergild, etc., are often specified
in convention or by law without regard to any relation to the means of
exchange actually in circulation. It is only when the economic affairs of
the organization are administered in money terms that von Mises* con-
tention that even the state seeks means of payment only as a means of
exchange becomes tenable. This has not been true of cases where the
possession of certain means of payment has been primarily significant as
a mark of social status. (See Heinrich Schurtz, Grundriss einer Entsteh-
ungsgeschichte des Geides, 1898). With die introduction of regulation
of money by the state, means of payment becomes the legal concept and
means of exchange die economic concept.

a. There seems at first sight to be an indistinct line between a
"good" which is purchased solely with a view to its future resale and a
medium of exchange. In fact, however, even under conditions which
are otherwise primitive there is a strong tendency for particular objects
to monopolize the function of medium of exchange so completely that
there is no doubt about their status. Wheat futures are traded in terms
which imply that there will be a final buyer. Therefore they cannot be
treated as means of payment or medium of exchange, let alone money,

3. So long as there is no officially sanctioned money, what is used as
means of exchange is primarily determined by the customs, interests,
and conventions to which the agreements between the partie* to trans-
actions are oriented. The reasons why specific things have become ac-
cepted as means of exchange cannot be gone into here. They have,
however, been exceedingly various and tend to he determined by the
type of exchange which has been of the greatest importance. By no
means every medium of exchange, even within the social group where
it has been employed, has been universally acceptable for every type of
exchange. Far instance, cowry shells, though used for other things, have
not been acceptable in payment for wives or cattle.

4. Sometimes means of payment which were not the usual means of
exchange have played an important part in the development of money
to its special status. As G F. Knapp has pointed out, the fact that vari-
ous types of debt have existed, such as obligations stemming from trib-
utes, dowries, payments for bride purchase, conventional gifts to kings

6 ] Media of Exc&mge, Means 'of Payment,. Money , 7 9

or by king? to each other, wergild, etc., and the fact that these have
often been payable in certain specific media, has created for these media,
by convention or by law, a special position. Very often they have been '
specific types of artifacts.

5. Money in the meaning of the present terminology may have been
the one-fifth shekel pieces bearing the stamp of merchant firms which
are mentioned in the Babylonian records, on the assumption, that i«.
that they were actually used as means of exchange. On the other hand,
bars of bullion which were not coined, but weighed, will here not be
treated as money, but only as means of payment and exchange. The
fact, however, that they were weighed has been enormously important
for the development of the habit of economic calculations. There are,
naturally, many transitional forms, such as the acceptance of coins by
weight rather than by denomination.

6. "Chartal" is a term introduced by Knapp in his Staatliche Theo-
rie des Geldes. All types of money which have been stamped or coined,
endowed with validity by law or by agreement, belong in this category,
whether they were metal or not. It does not, however;, seem reasonable
to confine the concept to regulations by the state and not to include
cases where acceptance is made compulsory by convention or by some
agreement. There seems, furthermore, to be no reason why actual mint-
fog by the state or under the control of the political authorities should
he a decisive criterion. For long periods this did not exist in China at all
and was very much limited in the European Middle Ages. As Knapp
would agree, it is only the existence of norms regulating the monetary
form which is decisive. As will be noted below, validity as a means of
payment'and formal acceptability as means of exchange in private trans-
actions may be made compulsory by law within the jurisdiction of the
political authority.

7. Natural means of exchange and of payment may sometimes be
used more for internal transactions, sometimes more for external. The
details need not be considered here. The question of the substantive
validity of money will be taken up later.

8. This is, furthermore, not the place to take up the substantive
theory of money in its relation to prices so fat as this subject belongs in
the field of economic sociology at all. For present purposes it will suffice

■ to state the fact that money, in its most important forms, is used, and
then to pf8ceed"'to develop some of the most general sociological con-
sequences of this fact, which is merely a formal matter when seen from
an economic point of view. It must, howevet, be emphasized that money
can never be merely a harmless "voucher" or a purely nominal unit of
accounting so long as it is money. Its valuation is always in very complex
ways dependent also on its scarcity or, in case of inflation, on its over-
abundance. This has been particularly evident in recent times, but is
equally true for all times.

A socialistic regime might issue vouchers, in payment for a given
quantity of socially useful 'labor," valid for the purchase of certain

8o SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. JI

types of goods. These might be saved or used in exchange, but their
behavior would follow the rules of barter exchange, not of money,
though the exchange might be indirect.

9. Perhaps the most instructive case of the Far-reaching economic
consequences of the relations between the monetary and non-monetary
uses of a monetary metal is that of Chinese monetary history, because
copper money, with high costs of production and wide fluctuations in
output of the monetary meta!, permits an especially clear view of the
phenomena involved.

7. The Primary Consequences of the Use of Money.
Credit

The primary consequences of the widespread use of money are;

( 1 ) The so-called "indirect exchange" as a means of satisfying con-
sumers' wants. The use of money makes it possible to obtain goods which
are separated from those offered in exchange for them in space, in time,
in respect to the persons involved, and, what is very important, in respect
to the quantity on each side of the transaction. This results in a tremen-
dous extension of the area of possible exchange relationships.

(2.) The valuation in terms of money of delayed obligations, espe-
cially of compensatory obligations arising out of an exchange Cshat is,
debts). This is, of course, closely related to the first point.

(3) The so-called "storage of value"; that is, the accumulation of
money in specie or in the form of claims to payment collectable at any
time as a means of insuring future control over opportunities of advanta-
geous economic exchange.

(4) The increasing transformation of all economic advantages into
the ability to control sums of money.

(5) The qualitative individuation of consumption and, indirectly, its
expansion for those who have control of money, of claims to money pay-
ment, or of opportunities to acquire money. This means the ability to
offer money as a means of obtaining goods and services of all kinds.

(6) The orientation of the procurement of utilities, as it has become
widespread today, to their bearing on the marginal utility of the sums of
money which the directing authorities of an economic unit expect to he
able tc£ontrol in the relevant future.

(7) With this goes the orientation of acquisitive activities to all the
opportunities which are made available by the extension of the area of
possible exchanges, in time, in place, and with respect to personal agents,
as noted above.

7 ] Primary Consequences of the Use of Money. Credit 8 i

(8) AH of these consequences are dependent on what is, in princi-
ple, the most important fact of all, the possibility of monetary calculation;
that is, the possibility of assigning money values to all goods and services
which in any way might enter into transactions of purchase and sale.

In substantive as distinguished from formal terms, monetary calcula-
tion means that goods are not evaluated merely in terms of their im-
mediate importance as utilities at the given time and place and for the
given person only. Rather, goods are more or less systematically com-
pared, whether for consumption or for production, with all potential
future opportunities of utilization or of gaining a return, including their
possible utility to an indefinite number of other persons who can be
brought into the comparison insofar as they are potential buyers of the
powers of control and disposal of the present owner. Where money cal-
culations have become typical, this defines the "market situation" of the
good in question. (The above statement formulates only the simplest and
best-known elements of any discussion of "money" and does not need
to be further commented upon. The sociology of the "market" will not
yet be developed here. On the formal concepts, see sees. 8 and io.)

The term "credit" in the most general sense will be used to designate
any exchange of goods presently possessed against the promise of a future
transfer of disposal over utilities, no matter what they may be. The grant-
ing of credit means in the first instance that action is oriented to the
probability that this future transfer of disposal will actually take place.
In this sense the primary significance of credit lies in the fact that it
makes it possible for an economic unit to exchange an expected future
surplus of control over goods or money against the present control of
some other unit over goods which the latter does not now intend to use-
Where the action is rational, both parties expect an improvement in their
position, regardless of what it consists in, over what it would be under
the present distribution of resources without the exchange.

i. It is by no means necessary for the advantages in question to be
. economic. Credit may be granted and accepted for all conceivable pur-
poses, for instance, charitable and military.

2. Credit may be granted and accepted in kind or in money, and in
both cases the promises may be of concrete goods or services or of
money payments. Carrying out credit transactions in terms of money,
however, means that they become the subject of monetary calculations
with all the attendant consequences, which will be discussed below.

3. This definition (of credit) for the most part corresponds to the
usual one. It is clear that credit relationships may exist between organi-
zations of all sorts, especially socialist or communist organizations. If
theft* exist side by side several such groups, which are not economically
autarkic, credit relationships are unavoidable. When the use of money

8 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11

is completely absent, 18 there is a difficult problem of finding a rational
basis of calculation. For die mere fact of the possibility of transactions
involving compensation in the future does not tell us anything about
the degree of rationality with which the parties agree on the conditions,
especially in the case of long-term credit. Such parties would be in some-
what the same situation as the household economic units (oifeos) of an-
cient times which exchanged their surpluses for things they had need
of. But there is this difference, that in the present situation die interests
of huge masses on a long-term basis would be at stake; and for rhe great
masses of the low-income groups, the marginal utility of present con-
sumption is particularly high. Thus there would be a probability that
goods urgently needed could only be obtained on unfavorable terms.

4. Credit may be obtained and used for the purpose of satisfying
. present consumption needs which are inadequately provided for. Even

in that case it will, so far as the action is economically rational, only be
granted in exchange for advantages. This is not, however, historically
usual for the earliest type of consumption credit and especially for
p emergency credit, the motives for which more frequently stemmed from
an appeal to ethical obligations. This will be discussed in Part Two, chap.
111:2. ,

5, What is the most common basis of credit, in money or in kind,
when it is granted for profit, is very obvious. It is the fact that, because
the lender is usually in a better economic situation, the marginal utility
of future expectations, as compared with present ones, is higher than it
is for the borrower. It should, however, be noted that what constitutes
a "better" situation is highly relative.

8. The Market

By the "market situation" (.Marktlage) for any object of exchange is
meant all the opportunities of exchanging it for money which are known
to the participants in exchange relationships and aid their orientation in
the competitive price struggle.

"Marketability" (MarktgangigkeiO is the degree of regularity with
which an object tends to be an object of exchange on the market.

"Market freedom" is the degree of autonomy enjoyed by the parties
to market relationships in the price struggle and in competition.

"Regulation of the market," on the contrary, is the state of affairs
where there is a substantive restriction, effectively enforced by the pro-
visions of an order, on Ihe marketability of certain potential objects of
exchange or on the market freedom of certain participants. Regulation
of the market may be determined CO traditionally, by the actors' be-
coming accustomed to traditionally accepted limitations on exchange or
to traditional conditions; (2) by convention, through social disapproval

8 ) The Market 8 3

of treating certain utilities as marketable or of subjecting certain objects
of exchange to free competition and free price determination, in general
or when undertaken by certain groups of persons; (3) by law, through
legal restrictions on exchange or on the Freedom of competition, in gen-
eral or for particular groups of persons or for particular objects of ex-
change. Legal regulations may take the form of influencing the market
situation of objects of exchange by price regulation, o. of limiting the
possession, acquisition, or exchange of rights of control and disposal over
certain goods to certain specific groups of persons, as in the case of legally
guaranteed monopolies or of legal limitations on economic action. (4) By
voluntary action arising from the structure of interests. In this case there
is substantive regulation of the market, though the market remains for-
mally free. This type of regulation tends to develop when certain par-
ticipants in the market are, by virtue of their totally or approximately
exclusive control of the possession of or opportunities to acquire certain
utilities — that is, of their monopolistic powers — in a position to influence
the market situation in such a way as actually to abolish the market free-
dom of others. In particular, they may make agreements with each other
and with typical exchange partners for regulating market conditions.
Typical examples are market quota agreements and price cartels.

i. It is convenient, though not necessary, to confine the term "mar-
ket situation" to cases of exchange for money, because it is only then
that uniform numerical statements of relationships become possible.
Opportunities for exchange in kind are best described simply as "ex-
change opportunities." Different kinds of goods are and have been mar-/
ketable in widely different and variable degrees, even where a money
economy was well developed. The details cannot be gone into here. In
general, articles produced in standardized form in large quantities and
widely consumed have been the most marketable; unusual goods, only
occasionally in demand, the least. Durable consumption goods which can
be used up over long periods and means of production with a long or
indefinite life, above all, agricultural and forest land, have been mar-
ketable to a much less degree than finished goods of everyday use or
means of production which are quickly used up, which can be used only
once, or which give quick returns.

2. Rationality of the regulation of markets has been historically asso-
ciated with the growth of formal market freedom and the extension of
marketability of goods. The original modes of market regulation have
been various, partly traditional and magical, partly dictated by kinship
relations, by status privileges, by military needs, by welfare policies, and
not least by the interests and requirements of the governing authorities
of organizations. But in each of these cases the dominant interests have
not been primarily concerned with maximizing the opportunities of ac-
quisition and economic provision of the participants in the market

8 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

themselves; have, indeed, often been in conflict with them. CO Some-
times the effect has been to exclude certain objects from market dealings,
either permanendy or for a time. This has happened in the magical
case, by taboo; in that of kinship, by the entailing of landed property;
on the basis of social status, as with knightly fiefs. In times of famine
the sale of grain has been temporarily prohibited. In other cases per-
mission to sell has been made conditional on a prior offer of the good
to certain persons, such as kinsmen, co-members of the status group, of
the guild, or of the town association; or the sale has been limited by
maximum prices, as is common in war time, or by minimum prices.
Thus, in the interests of their status dignity magicians, lawyers, or phy-
sicians may not be allowed to accept fees below a certain minimum. (.2)
Sometimes certain categories of persons, such as members of the nobil-
ity, peasants, or sometimes even artisans, have been excluded from
market trade in general or with respect to certain commodities. (3)
Sometimes the market freedom of consumers has been restricted by regula-
tions, as by the sumptuary laws regulating the consumption of different
status groups, or by rationing in case of war or famine. (4) Another type
is the restriction of the market freedom of potential competitors in the
interest of the market position of certain groups, such as the professions or
the guilds. Finally, (5) certain economic opportunities have been reserved
to the political authorities (royal monopolies) or to those holding a charter
from such authorities. This was typical for the early capitalistic mono-
polies.

Of all these, the fifth type of market regulation bad the highest
"market-rationality," and the first the lowest. By "rationality" we here
mean a force which promotes the orientation of the economic activity
of strata interested in purchase and sale of goods on the market to the ,
market situations. The other types of regulation fit in between these two
with respect to their rationality-impeding effect. The groups which, rel-
ative to these forms of regulation, have been most interested in the free-
dom of the market, have been those whose interests lay in the greatest
possible extension of the marketability of goods, whether from the point
of view of availability for con sumption, or of ready opportunities for
sale. Voluntary market regulation first appeared extensively and per-
manently only on behalf of highly developed profit-making interests.
With a view to the securing of monopolistic advantages, this could take
several forms: (i) the pure regulation of opportunities for purchase and
sale, which is typical of the widespread phenomena of trading mono-
polies: (2) the regulation of transportation facilities, as in shipping and
railway monopolies; ( 3} the monopolization of the production of certain
goods; and (4) that of the extension of credit and of financing. The last
two types generally are accompanied by an increase in the regulation of
economic activity by organizations. But unlike the primitive, irrational
forms of regulation, this is apt to be oriented in a methodical manner to the
market situation. The starting point of voluntary market regulation has in
general been the fact that certain groups with a far-reaching degree of

8 ] _ The Market 8 5

actual control over economic resources have been in a position to take
advantage o£ the formal Freedom of the market to establish monopolies.
Voluntary associations of consumers, such as consumers' co-operatives,
" have, on the other hand, tended to originate among those who were in
^,an economically weak position. They have hence often been able to ac-
complish savings for their members, but only occasionally and limited to
particular localities have they been able to establish an effective system
of market regulation.

9. Formal and Substantive Rationality of Economic
Action

The term "formal rationality of economic action" will be used to
designate the extent of quantitative calculation or accounting which is
technically possible and which is actually applied. The "substantive
rationality," on the other hand, ts the degree to which the provisioning of
gjven groups of persons (no matter how delimited) with goods is shaped
by economically oriented social action under some criterion (past,
present, or potential) of ultimate values (weriende Postulated, regardless
of the nature of these ends. These may be of a great variety.

1. The terminology suggested above is thought of merely as a means
of securing greater consistency in the use of the word "rational" in this
field. It is actually only a more precise form of the meanings which are
continually recurring in the discussion of "nationalization" and of the
economic calculus in money and in kind.

2. A system of economic activity will be called "formally" rational
according to the degree in which the provision for needs, which is es-
sential to every rational economy, is capable of being expressed in nu-
merical, calculable terms, and is so expressed. In the first instance, it is
quite independent of the technical form these calculations take, particu-
larly whether estimates are expressed in money or in kind, The concept
is thus unambiguous, at least in the sense that expression in money
term yields the highest degree of formal caiculabiiity. Naturally, even
this is true only relatively, so long as other things are equal.

3. The concept of "substantive rationality," on the other hand, is full
of ambiguities. It conveys only one element common to all "substantive"
analyses: namely, that they do not restrict themselves to note the purely
formal and (relatively) unambiguous fact that action is based on "goal-
oriented" rational calculation with the technically most adequate availa-
ble methods, but apply certain criteria of ultimate ends, whether they be
ethical, political, utilitarian, hedonistic, feudal (_standisch), egalitarian,
or whatever, and measure the results of the economic action, however
formally "rational" in the sense of correct calculation they may be,
against these scales of "value rationality" or "substantive goal ration-

8 6 SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Cfc. II

ality." There is an infinite number of possible value scales for this type
of rationality, of which the socialist and communist standards consti-
tute only one group. The latter, although by no means unambiguous
in themselves, always involve elements of social justice and equality.
Others are criteria of status distinctions, or of the capacity for power,
especially of the war capacity, of a political -unit; all these and many
others are of potential "substantive" significance. These points of view
are, however, significant only as bases from which to judge the out-
come of economic action. In addition and quite independently, it is
possible to judge from an ethical, ascetic, or esthetic point of view the
spirit of economic activity (Winsehaftsgemimtng) as well as the
instruments of economic activity. All of these approaches may consider
the "purely formal" rationality of calculation in monetary terms as of ■
quite secondary importance or even as fundamentally inimical to their
respective ultimate ends, even before anything has been said about the
consequences of the specifically modern calculating attitude. There is
no question in this discussion of attempting value judgments in this
field, but only of determining and delimiting what is to be called
"formal." In this context the concept "substantive" is itself in a certain
sense "formal;" that is, it is an abstract, generic concept.

jo. The Rationality of Monetary Accounting. Manage-
ment and Budgeting

From a purely technical point of view, money is the most "perfect"
means of economic calculation. That is, it is formally the most rational
means of orienting economic activity. Calculation in terms of money,
and not its actual use, is thus the specific means of rational, economic
provision. So far as it is completely rational, money accounting has the
following primary consequences:

(O The valuation of all the means of achieving a productive purpose
in terms of the present or expected market situation. This includes every-
thing which is needed at present or is expected to be needed in the fu-
ture^ everything actually in the actor's control, which he may come to
control or may acquire by exchange from the control of others; everything
lost, or in danger of damage or destruction; all types of utilities, of means
of production, or any other sort of economic advantage.

(2) The quantitative statement of (a) the expected advantages of
every projected course of economic action and (b) the actual results of
every completed action, in the form of an account comparing money costs
and money returns and the estimated net profit to be gained from alterna-
tives of action.

(3) A periodical comparison of all the goods and other assets con-

io ] - Rationality of Monetary Accounting 8 7

trolled by an economic unit at a given time with those controlled at the
beginning of a period, both in terms of money,

(4) An ex-ante estimate and an ex-post verification of receipts and
expenditures, either those in money itself-, orthose which can be va' sed
in money, which the economic unit is likely to have available for its use
during a period if it maintains the money value of the means at its dis-
posal intact.

(5) The orientation of consumption to these data by the utilization of
the money available (on the basis of point 4) during the accounting period
for the acquisition of the requisite utilities in accordance with the principle
of marginal utility.

The continual utilization and procurement of goods, whether through
production or exchange, by an economic unit for purposes of its own
consumption or to procure other goods for consumption, will be called
"budgetary management" (Haushali) ." Where rationality exists, its
basis for an individual or for a group economically oriented in this way is
the "budget" (_Haushaltsplan), which states systematically in what way
the needs expected for an accounting period— needs for utilities or for
means of procurement to obtain them — can be covered by the anticipated
income.

The "income" of a "budgetary unit" is the total of goods; valued in
money, which, as estimated according to the principle stated above in
point (4), has been available during a previous period or on the availa-
bility of which the unit is likely to be able to count on the basis of a
rational estimate for the present or for a future period. The total esti-
mated value of the goods at the disposal of a budgetary unit which are
normally utilized over a longer period, either directly or as a source of
income, will be called its "wealth" (Vermdgen'). 1 * The possibility of com-
plete monetary budgeting for the budgetary unit is dependent on the pos-
sibility that its income and wealth consist either in money or in goods
which are at any time subject to exchange for money; that is, which are
in the highest degree marketable.

A rational type of management and budgeting of a budgetary unit is
possible also where calculation is carried out in terms of physical units,
as will be further discussed below. It is true that in that case there is no
such thing as "wealth" capable of being expressed in a single sum of
money, nor is there a single "income" in the same sense. Calculation is
in terms of "holdings" of concrete goods and, where acquisition is limited
to peaceful means, of concrete "receipts" from the expenditure of avail-
able real goods and services, which will he administered with a view to
attaining the optimum provision for the satisfaction of wants. If the
wants are strictly given, this involves a comparatively simple problem

8 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

from the technical point of view so long as the situation does not require
a very precise estimate of the comparative utility fo be gained from the
allocation of the available resources to each of a large number of very
heterogeneous modes of use. If the situation is markedly different, even

the simple self-sufficient household is faced with problems which are
only to a very limited degree subject to a formally exact solution by cal-
culation. The actual solution is usually found partly by the application
of purely traditional standards, partly by making very rough estimates,
which, however, may be quite adequate where both the wants concerned
and the conditions of provision for them are well known and readily
comparable. When the "holdings" consist in heterogpneous goods, as
must be the case in the absence of exchange, a formally exact calculable
comparison of the state of holdings at the beginning and the end of a
period, or of the comparison of different possible ways of securing
receipts, is possible only for categories oi goods which ars qualitatively
identical. The typical result is that all availabie goods are treated as form-
ing a totality of physical holdings, and certain quantities of goods are
treated as available for consumption, so long as it appears that this will
not in the long run diminish die available resources. But every change
in the conditions of production — as, for instance, through a bad harvest
— or any change in wants necessitates a new allocation, since it alters the
scale of relative marginal utilities. Under conditions which are simple
and adequately understood, this adaptation may be carried out without
much difficulty. Otherwise, it is technically more difficult than if money
terms could be used, in which case any change in the price situation in
principle influences the satisfaction only of the wants which are marginal
on the scale of relative urgency and are met with the last increments of
money income.

As accounting in kind becomes completely rational and is emanci-
pated from tradition, the estimation of marginal utilities in terms of the
relative urgency of wants encounters grave complications; whereas, if it
were carried out in terms of monetary wealth and income, it would be
relatively simple. In the latter case the question is merely a "marginal"
one, namely whether to apply more labor or whether to satisfy or sacri-
fice, as the case may be, one or more wants, rather than others. For when
the problems of budgetary management are expressed in money terms,
this is the form the "costs" take [opportunity cost]. But if calculations
are in physical terms, it becomes necessary to take into account, besides
the scale of urgency of the wants, also (i) the alternative modes of
utilization of all means of production, including the entire amount of
labor hitherto expended, which means different (according to the mode
of utilization) and variable ratios between want satisfaction "and the ex-
penditure of resources, and therefore, (2), requires a consideration of

io ] Rationality c*f Monetary Accounting 8 9

the volume and type of additional labor which the householder would
have to expend to secure additional receipts and, (3), of the mode of
utilization of the material expenditures if the goods to be procured can
be of various types. It is one of the most important tasks of economic
theory to analyse the various possible ways in which these evaluations
can be rationally carried out. It is, en the other hand, a task for economic
history to pursue the ways in which the budgetary management in
physical terms has been actually worked out in the course of various
historical epochs. In general, the following may be said: (1) that the
degree of formal rationality has, generally speaking, fallen short of the
level which was even empirically possible, to say nothing of the theoreti-
cal maximum. As 3 matter of necessity, the calculations of money-less
budgetary management have in the great majority of cases remained
strongly bound to tradition. (2.) In the larger units of this type, precisely
because an expansion and refinement of everyday wants has not taken
place, there has been a tendency to employ surpluses for uses of a non-
routine nature — above all, for artistic purposes. This is an important basis
for the artistic, strongly stylized cultures of epochs with a "natural
economy."

1. The category of "wealth" includes more than physical goods.
Rather, it covers all economic advantages over which the budgetary
unit has an assured control, whether that control is due to custom, to
the play of interests, to convention, or to law. The "good will" of a
profit-making organization, whether it be a medical or legal practice,
or a retail shop, belongs to the "wealth" of the owner if it is, for what-
ever reason, relatively stable since, if it is legally appropriated, it can
constitute "property" in the terms of the definition in ch. 1: 10 above.

2. Monetary calculation can be found without the actual use of
money or with its use limited to the settlement of balances which can-
not be paid in kind in the goods being exchanged on both sides.
Evidence of this is common in the Egyptian and Babylonian records.
The use of money accounting as a measure for payments in kind is

,. found in the permission in Hammurabi's Code and in provincial -.
Roman and early Medieval law that a debtor may pay an amount
due expressed in money "in whatever form he will be able" (in aw
potnerit). The establishment of equivalents must in such cases have
been carried out on the basis of traditional prices or of prices laid down
by decree.

3. Apart from this, the above discussion contains only common-
places, which are introduced to facilitate the formulation of a precise
concept of the rational budgetary unit as distinguished from that of a
rational profit-making enterprise — the latter will be discussed presently.
It is important to state explicitly that both can take rational forms.
The satisfaction of needs; is not something more "primitive" than
profit-seeking; "wealth" is not necessarily a more primitive category

9 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11

than capital; "income," than profit. It is, however, true that historically
the budgetary unit has been prior and has been the dominant form in
most periods of the past.

4. It is indifferent what unit is the bearer of a budgetary manage-
ment economy. Both the budget of a state and the family budget of a
wr ker fall under the same category.

5. Empirically the administration of budgetary units and profit-
making are not mutually exclusive alternatives. The business of a
consumers* cooperative, for instance, is normally oriented to the eco-
nomical provision for wants; but in the form of its activity, it is a
"profit-making organization" without being oriented to profit as a
substantive end. In the action of an individual, the two elements may
be so intimately intertwined, and in the past have typically been so, •
that only the concluding act — namely, the sale or the consumption

of the product — can serve as a basis for interpreting the meaning of the
action. This has been particularly true of small peasants. Exchange may
well be a part of the process of budgetary management where it is a
matter of acquiring consumption goods by exchange and of disposing
of surpluses. On the other hand, the budgetary economy of a prince
or a landed lord may include profit-making enterprises in the sense of
the following discussion. This has been true on a large scale in earlier
times. Whole industries have developed out of the heterocephalous
and heteronomous auxiliary enterprises which seigneurial landowners,
monasteries, princes, etc., have established to exploit the products of
their lands and forests. AH sorts of profit- ma king enterprises today are
part of the economy of such budgetary units as local authorities or even
states. In these cases it is legitimate to include in the "income" of the
budgetary units, if they are rationally administered, only the net profits
of these enterprises. Conversely, it is possible for profit-making enter- ,
prises to establish various types of heteronomous budgetary units under
their direction for such purposes as providing subsistence for slaves
or wage workers — among them are "welfare" organizations, housing and
eating facilities. Net profits in the sense of point CO of this section are
money surpluses after the deduction of all money costs.

6. It Has been possible here to give only the most elementary
starting points for analysing the significance of economic calculations
in kind for general social development.

1 1 , The Concept and Types of Profit-Making. The Role
of Capital

"Profit-making" QLTwerhen)™ is activity which is oriented to oppor-
tunities for seeking new powers of control over goods on a single oc-
casion, repeatedly, or continuously. "Profit-making activity" is activity
which is oriented at least in part to opportunitie 1 ; of profit-making. Profit-

1 1 ] Concept and Types of Profit-Making. Capital 9 1

making is "economic" if it is oriented to acquisition by peaceful methods
It may be oriented to the exploitation of market situations. "Means of
profit-making" (ErwethsmitteV) are those goods and other economic ad-
vantages which are used in the interests of economic profit-making. "Ex-
change for profit" is that which is oriented to market situations in order to
increase control over goods rather than to secure means for consumption
(budgetary exchange). "Business credit" is that credit which is extended
or taken up as a means of increasing control over the requisites of profit-
making activity.

There is a form of monetary accounting which is peculiar to rational
economic profit-making; namely, "capital accounting." Capital accounting
is the valuation and verification of opportunities for profit and of the
success of profit-making activity by means of a valuation of the total
assets (goods and money) of the enterprise at the beginning of a profit-
making venture, and the comparison of this with a similar valuation of
the assets still present and newly acquired, at the end of the process; in
the case of a profit-making organization operating continuously, the
same ts done for an accounting period. In either case a balance is drawn
between the initial and final states of the assets. "Capital" is the money
value of the means of profit-making available to the enterprise at the
balancing of the hooks; "profit" and correspondingly "loss," the differ-
ence between the initial balance and that drawn at the conclusion of the
period. "Capital risk" is the estimated probability of a loss in this
balance. An economic "enterprise" (Unternehmen) is autonomous
action capable of orientation to capital accounting. This orientation takes
place by means of "calculation"; ex-ante calculation of the probable risks
and chances of profit, ex-post calculation for the verification of the actual
pro^t or loss resulting. "Profitability" means, in the rational case, one of
two things: (1) the profit estimated as possible by ex-snte calcu tions,
the attainment of which is made an objective of the entrepreneur's ac-
tivity; or (2) that which the ex-post calculation shows actually to have
been earned in a given period, and which is available for the consump-
tion uses of the entrepreneur without prejudice to his chances of future
profitability. In both cases it is usually expressed in ratios — today, per-
centages^ — in relation to the capital of the initial balance.

Enterprises based on capital accounting may be oriented to the ex-
ploitation of opportunities of acquisition afforded by the market, or they
may be oriented toward other chances of acquisition, such as those based
on power relations, as in the case of tax farthing or the sale of offices.

Each individual operation undertaken by a rational profit-making
enterprise is oriented to estimated profitability by rneans of calculation.
In the case of profit-making activities on the market, capital accounting

9 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

requires: (i) that there exist, subject to estimate beforehand, adequately
extensive and assured opportunities for sale of the goods which the en-
terprise procures; that is, normally, a high degree of marketability; (2)
that the means of carrying on the enterprise, such as the potential means
of production and the services of labor, are also available in the market
at costs which can be estimated with an adequate degree of certainty;
and finally, (3) that the technical and legal conditions, to which the
process from the acquisition of the means of production to final sale,
including transport, manufacturing operations, storage, etc., is subjected,
give rise to money costs which in principle are calculable.

The extraordinary importance of the highest possible degree of cal-
culability as the basis for efficient capital accounting will be noted time
and again throughout the discussion of the sociological conditions of
economic activity. It is far from the case that only economic factors are
important to it. On the contrary, it will be shown that the most varied
sorts of external and subjective barriers account for the fact that capital
accounting has arisen as a basic form of economic calculation only in the
Western World.

As distinguished from the calculations appropriate to a budgetary
unit, the capital accounting and calculations of the market entrepreneur
are oriented not to marginal utility, but to profitability. To be sure, the
probabilities of profit are in the last analysis dependent on the income of
consumption units and, through this, on the marginal utility structure of
. the disposable money incomes of the final consumers of consumption
goods. As it is usually put, it depends on their "purchasing power" for
the relevant commodities. But from a technical point of view, the ac-
counting calculations of a profit-making enterprise and of a consumption
unit differ as fundamentally as do the ends of want satisfaction and of
profit-making which they serve. Fox purposes of economic theory, it is
the marginal consumer who detetaimes the direction of production. In
actual fact, given the actual distribution of power, this is only true in a
limited sense for the modern situation. To a large degree, even though
the consumer has to be in a position to buy, his wants are "awakened"
and "directed" by the entrepreneur.

In a market economy every form of rational calculation, especially of
capital accounting, is oriented to expectations of prices and their changes
as they are determined by the conflicts of interests in bargaining and
competition and the resolution of these conflicts. In profitabiuty^account-
ing this is made particularly clear in that system of bookleeping which
is (up to now) the most highly developed one from a technical point
of view, in the so-called double-entry bookkeeping. Through a system
of individual accounts the fiction is here created that different depart-

1 1 ] Concept and Types of Profit-Making. Capital 9 3

merits within an enterprise, or individual accounts, conduct exchange
operations with each other, thus permitting a check in the technically
most perfect manner on the profitability of each individual step or
measure.

Capital accounting in its formally most rational shape thus presup-
poses the battle of man -with man. And this in turn involves a further
very specific condition. No economic system can directly translate sub-
jective "feelings of need" into effective demand, that is, into demand
which needs to be taken into account and satisfied through the produc-
tion of goods. For whether or not a subjective want can be satisfied de-
pends, on the one hand, on its place in the scale of relative urgency; on
the other hand, on the goods which are estimated to be actually or
potentially available for its satisfaction.- Satisfaction does not take place
if the utilities needed for it are applied to other more urgent uses, or if
they either cannot be procured at all, or only by such sacrifices of labor
and goods that future wants, which are still, from a present point of view,
adjudged more urgent, could not be satisfied. This is triie of consump-
tion in every kind of economic system, including a comnfunist one.

In an economy which makes use of capital accounting and which
is thus characterized by the appropriation of the means cf production by
individual units, that is by "property" (see ch. I, sec. 10), profitability •
depends on the prices which the "consumers," according 10 the marginal
utility of money in relation to their income, can and will bfiy. It is possi-
ble to produce profitably only for those consumers who, m; these terms,
have sufficient income. A need may fail to be satisfied not fcfely when an
individual's own demand for other goods takes precedence, hut also when
the greater purchasing power of others for all types of goods prevails.
Thus the fact that the batde of man against man on the Tnarjiet is an
essential condition for the existence of rational money— accounting further
implies that the outcome of the economic process is decisively influenced
by the ability of persons who are more plentifully supplied with money to
outbid the others, and of those more favorably situated for production to
underbid their rivals on the selling side. The latter ate particularly those
well supplied with goods essential to production or with money. In par-
ticular, rational money-accounting presupposes the existence of effective
prices and not merely of fictitious prices conventionally employed for*
technical accounting purposes. This, in turn, presupposes money func-
tioning as an effective medium of exchange, which is in demand as such,
not mere tokens used as purely technical accounting units. 14 Thus die
orientation of action to money prices and to profit .has the following
consequences: (1) that the differences in the distribution of money or
marketable goods between the individual parties in the market is de

94 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ck. 11

cisive in determining the direction taken by the production of goods, so
* far as it is carried on by profit-making enterprises, in that it is only demand
made effective through the possession of purchasing power which is and
can be satisfied- Further, (2) the question, what type of demand is to
be satisfied by the production of goods, becomes in rum dependent on
the profitability of production itself. Profitability is indeed formally a
rational category, but for that very reason it is indifferent with respect to
substantive postulates unless these can make themselves felt in the
market in the form of sufficient purchasing power.

"Capital goods," as distinguished from mere possessions or parts of
wealth of a budgetary unit, are all such goods as are administered on the
basis of capital accounting. "Capital interest," as distinct from various
other possible kinds of interest on loans, is: CO what is estimated to be
the minimum normal profitability of the use of material means of profit-
making, CO the rate of interest at which profit-making enterprises can
obtain money or capital goods.

This exposition only repeats generally known things in a some-
what more precise form. For the technical aspects of capital accounting,
compare the standard textbooks of accountancy, which are, in part,
excellent. E.g. those of Leitner, Sch&r, etc.

1. The concept of capital has been defined strictly with reference
to the individual private enterprise and in Accordance with private
business-accounting practice, which was, indeed, the most convenient
method for present purposes. This usage is much less in conflict with
everyday speech than with the usage which in the past was frequently
found in the social sciences and which has by no means been consistent-
In order to test the usefulness of the present business-accounting term,
which is now being increasingly employed in scientific writings again,
it is necessary only to ask the following que«ions: (1) What does it
mean when we say that a corporation has a "basic capital" (net worth)
of one miiiior pounds? And CO> what when we.tay that capital is
"written down"? What, (3), when corporation law prescribes what ob-
jects may be "brought in" as capital and in what manner? The first
statement means that only that part of a surplus of assets over liabilities,
as shown on the balance-sheet after proper inventory control and veri-
fication, which exceeds one million pounds can he accounted as
"profit" and distributed to the share-holders to do with as they please
(or, in the case of a oneman enterprise, that only this excess can be
consumed in the household). The second statement concerns a situa-
tion where there have been heavy business losses, and means that the
distribution of profit need not be postponed until perhaps after many
years a surplus exceeding one million pounds has again been ac-
cumulated, but that the distribution of "profits" may begin at a lower
surplus. But in order to do this, it is necessary to "write down" the
capital, and this is the purpose of the operation. Finally, the purpose

1 1 ] Concept and Types of Profit-Making. Capital 9 5

of prescriptions as to how basic capital (net worth, or ownership) can
be "covered" through the bringing into the company of material assets,
and how it may be "written up" or "written down," is to give creditors
and purchasers of shares the guarantee that the distribution of profits
will be carried cut "correctly" in accordance with the rules of rational
business accounting, i.e., in such a way that Ca) long-run profitability
is maintained and, (b), that the security of creditors is not impaired.
The rules about "bringing in" are all concerned with the admissability
and valuation of objects as paid-in capital. (4) What does it mean when
we say that as ?. result of unprofitability capital "seeks different invest-
ments"? Either we are talking about "wealth," for "investment" (A«-
legen) is a category of the administration of wealth, not of profit-
making enterprise. Or else, more rarely, it may mean that real capital
goods on the one hand have ceased to be such by being sold, for in-
stance as scrap or junk, and on the other have regained that quality in
other uses. (5) What is meant when we speak of the "power of capital"?
We mean that the possessors of control over the means of production
and over economic advantages which can be used as capital goods in a
profit-making enterprise enjoy, by virtue of this control and of the orien-
tation of economic action to the principles of capitalistic business cal-
culation, a specific position of power in relation to others.

In the earliest beginnings of rational profit-making activity capital
appears, though not under this name, and only as a sum of money used
in accounting. Thus in the commenda relationship various types of
goods were entrusted to a travelling merchant to sell in a foreign market
and at times for the purchase of other goods wanted for sale at home.
The profit or loss was then divided in a particular proportion between
the travelling merchant and the entrepreneur who had advanced the
capital. For for this to take place it was necessary to value the goods in
money; that is, to strike balances at the beginning and the conclusion
of the venture. The "capital" of the comittenda or the societas maris was
simply this money valuation, which served only the purpose of settling
accounts between the parties and no other.

What do we mean by the term "capital market"? We mean that
certain "goods," including in particular money, are in demand in order
to be used as capital goods, and that there exist profit-making enter-
prises, especially certain types of "banks," which derive their profit from
the business of providing these goods. In the case of so-called "loan capi-
tal," which consists in handing over money against a promise to return
the same amount at a later time with or without the addition of interest,
the term "capital" will be used only if lending is the object of a profit-
making enterprise. Otherwise, the term "money loans" will be used.
Everyday speech tends to talk about "capital" whenever "interest" is
paid, because the latter is usually expressed as a percentage of the basic
sum; only because of this calculatory function is the amount of a loan or
a deposit called a "capital." It is true, of course, that this was the origin
of the term: cafitale was the principal sum of a loan; the term is said,

9 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ck. II

though it cannot he proved, to derive from the heads counted in a loan
of cattle. But this is irrelevant. Even in very early times a loan of real
goods was reckoned in money terms, on which basic interest was then
calculated, so that already here capital goods and capital accounting are
typically related, as has been true in later times, In the case of an ordi-
nary loan, which is made nmply as a phase in the administration of
budgetary wealth and so far as it is employed for the needs of a
budgetary unit, the term "loan capital" will not be used. The same, of
course, applies to the recipient of the loari.

The concept of an "enterprise" is in accord with the ordinary usage,
except for the fact that the orientation to capital accounting, which is
usually taken for granted, is made explicit. This is done in order to
emphasize that not every case of search for profit as such constitutes an
"enterprise," but only when it is capable of orientation to capital ac-
counting, regardless of whether it is on a large or a small scale. At the
same time it is indifferent whether this capital accounting is in fact
rationally carried out according to rational principles. Similarly the terms
"profit" and "loss" will be used only as applying to enterprises oriented
to capital accounting. The money earned without the use of capital by
such persons as authors, physicians, lawyers, civil servants, professors,
clerks, technicians, or workers, naturally is also "acquisition" (.Erwerh*),
but shall here not be called "profit." Even everyday usage would not call
it profit. "Profitability" is a concept which is applicable to every dis-
crete act which can be individually evaluated in terms of business
accounting technique with respect to profit and loss, such as the employ-
ment of a particular worker, me purchase of a new machine, the deter-
mination ot rest periods in the working day, etc.

It is not expedient in defining the concept of interest cm capital to
start with contracted Interest returns on any type of loan. If somebody
helps out a peasant by giving him seed and demands an increment on
its return, or if the same is done in the case of money loaned to a house-
hold to be returned with interest, we would hardly want to call this a
"capitalistic" process. It is possible, where action is rational, for the
lender to secure an additional amount because his creditor is in a posi-
tion to expect benefits from the use of the loan greater than the amount
of the interest he pays; when, that is, the situation is seen in terms of
what it would be if he had to do without the loan. Similarly, the lender,
being aware of the situation, is in a position to exploit it, in that for him
the marginal utility of his present control over the goods he lends is
exceeded by the marginal utility at the relevant future time of the
repayment with the addition of the interest. These are essentially cate-
gories of the administration of budgetary units and their wealth, not of
capital accounting. Even a person who secures an emergency loan for
his urgent personal needs from a "Shylock" is not for purposes of the
present discussion said to be paying interest on capital, nor does the
lender receive such interest It is rather a case of return for the loan.
The person who makes a business of lending charges himself interest on

1 1 ] Concept and Types of Profit-Making. Capital 9 7

his business capital if he acts rationally, and must consider that he has suf-
fered a "loss" if the returns from loans do not cover this rate of profita-
bility. This interest we will consider "interest on capital"; the former is
simply "interest." Thus for the present terminological purposes, interest
on capital is always that which is calculated on capital, not that which
is a payment for capital. It is always oriented to money valuations, and
thus to the sociological fact that disposal over profit-making means,
whether through the market or not, is in private hands; that is, appro-
priated. Without this, capital accounting, and thus calculation of interest,
would be unthinkable.

In a rational profit-making enterprise, the interest, which is charged
on the books to a capital sum, is the minimum of profitability. It is in
terms of whether or not this minimum is reached that a judgment of
the advisability of this particular mode of use of capital goods is arrived
at. Advisability in this context is naturally conceived from the point of
view of profitability. The rate for this minimum profitability is, it is well
known, only approximately that which it is possible to obtain by giving
credit on the capital market at the time. But nevertheless, the existence
of the capital market is the reason why calculations are made on this
basis, just as the existence of market exchange is the basis for making
entries against the different accounts. It is one of the fundamental phe-
nomena of a capitalistic economy that entrepreneurs are permanently
willing to pay interest for loan capital. This phenomenon can only be
explained by understanding bow it is that the average entrepreneur may
hope in the long run to earn a profit, or that entrepreneurs on the
average in fact do earn it, over and above what they have to pay as
interest on loan capital — that is, under what conditions it is, on the
average, rational to exchange 100 at the present against 100 plus X in
the future.

Economic theory approaches this problem in terms of the relative
marginal utilities of goods under present and under future control. So
far, so good. But the sociologist would then like to know in what human
actions this supposed relation is reflected in such a manner that the
actors can take the consequences- of this differential valuation [of pres-
ent and future goods], in the form of an "interest rate," as a criterion
for their own operations. For it is by no means obvious that this should
happen at all times and places. It does indeed happen, as we know, in
profit-making economic units. But here the primary cause is the eco-
nomic power distribution QMachiiage) between profit-making enter-
prises and budgetary units (households), both those consuming the
goods offered and those offering certain means of production (mainly
labor). Profit-making enterprises will be founded and operated continu-
ously (capitaKstically) only if it is expected ^that the minimum rate of
interest on capital can be earned. Economic theory — which could, bow-
ever, also be developed along very different lines — might then very well
say that this exploitation of the power distribution (which itself is a
consequence of the institution or private property in goods and the

9 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11

means of production) permits it only to this particular class of economic
actors to conduct their operations in accordance with the "interest" cri-
terion.

2. The administration of budgetary "wealth" and profit-making en-
terprises may he outwardly so similar as to appear identical. They are in
fact in the analysis only distinguishable in terms of the difference in
meaningful orientation of the corresponding economic activities. In the
one case, it is oriented to maintaining and improving profitability and
the market position of the enterprise; in the other, to the security and
increase of wealth and income. It is, however, by no means necessary
that this fundamental orientation should always, in a concrete case, be
turned exclusively in one direction or the other; sometimes, indeed, this is -
impossible. In cases where the private wealth of an entrepreneur is identi-
cal with this business control over the means of production of his firm
and his private income is identical with the profit of the business, the
two things seem to go entirely hand in hand. But all manner of personal
considerations may in such a case cause the entrepreneur to enter upon
business policies which, in terms of the rationality of the conduct of
enterprise, are irrational. Yet very generally private wealth and control
of the business are not identical. Furthermore, such factors as personal
indebtedness of the proprietor, his personal demand for a higher present
income, division of an inheritance, and the like, often exert what is, in
terms of business considerations, a highly irrational influence on the
business. Such situations often lead to measures intended to eliminate
these influences altogether, as in the incorporation of family businesses.

The tendency to separate the sphere of private affairs from the busi-
ness is thus not fortuitous. It is a consequence of the fact that, from the
point of view of business interest, the interest in maintaining the private
wealth of the owner is often irrational, as is his interest in income
receipts at any given time from the point of view of the profitability of
the enterprise. Considerations relevant to the profitability of a business
are also not identical with those governing the private interests of per-
sons who are related to it as workers or as consumers. Conversely, the
interests growing out of the private fortunes and income of persons or
organizations having powers of control over an enterprise do not neces-
sarily lie in the same direction as the long-run considerations of optimiz-
ing its profitability and its market power position. This is definitely,
even especially, also true when a profit-making enterprise is controlled
by a producers' co-operative association. The objective interests of
rational management of a business enterprise and the persona! interest
of the individuals who control it are by no means identical and are
often opposed. This fact implies the separation as a matter of principle
of the budgetary unit and the enterprise, even where both, with respect
to powers of control and the objects controlled, are identical.

The sharp distinction between the budgetary unit and the profit-
making enterprise should also be clearly brought out in the terminology.
The purchase of securities on the part of a private investor who wishes

i z ] Concept and Types of Profit-Making. Capital 9 9

to consume the proceeds is not a "capital- investment," but a "wealth'
investment." A money loan made by a private individual for obtaining
the interest is, when regarded from the standpoint of die lender, en-
tirely different from one made by a bank to the same borrower. On the
other hand, a loan made to a consumer and one to an entrepreneur for
business purposes are quite different from the point of view of the bor-
rower. The bant is investing capital and the entrepreneur is borrowing
capital; but in the lirst case, it may be for the borrower a matter simply
of borrowing fo* purposes of budgetary management; in the second it
may be, for the lender, a case of investment of private wealth. This dis-
tinction between private -wealth and capital, between the budgetary unit
and the profit- nuking enterprise, is of far-reaching importance. In par-
ticular, without it it is impossible to understand the economic develop-
ment of the ancient world and the limitations on the development of the
capitalism of those times. (The well-known articles of Rodbertus are, in
spite of their errors and incompleteness, still important in this context,
but should be supplemented by the excellent discussion of Karl
Biicher.) 18

3. By no means all profit-making enterprises with capital accounting
1 are doubly oriented to the market in that they botb purchase means of

production on the market and sell their product or-'iinal services there.
Tax farming and all sorts of financial operations 'Have been carried on
with capital accounting, but without selling any products. The very
important consequences of this will be discussed later. It is a case of
capitalistic profit-making which is not oriented to the market,

4. For reasons of ' convenience, acquisitive activity (Erwerhstatigkeit)
and profit-making enterprise (TLrwerbshetTieh*) have been distinguished.
Anyone is engaged in acquisitive activity so far as he seeks, among other
things, in given ways to acquire goods -money or others — which he
does not yet possess. This includes the civil servant and the worker, no
less than the entrepreneur. 'But the term "profit- making enterprise" will
be confined to those types of acquisitive activity which are continually
oriented to market advantages, using goods as means to secure profit,
either (a) through the production and sale of goods in demand, or (b)
through the offer of services in demand in exchange for money, be it
through free exchange or through the exploitation of appropriated ad-
vantages, as has been pointed out above under (3). The person who is
a mere rentier or investor of private wealth is, in the present terminol-
ogy, not engaged in profit-making, no matter how rationally he adminis-
ters his resources.

5. It goes without saying that in terms of economic theory the direc-
tion in which goods can be profitably produced by profit-making enter-
prises is determined by the marginal utilities for the last consumers in
conjunction with the tatter's incomes. But from a sociological point of
view it should not be forgotten that, to a large extent, in a capitalistic
economy (a) new wants are created and others allowed to disappear and
(b) capitalistic enterprises, through tbeir aggressive advertising policies,

I O O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

exercise an important influence on the demand functions of consumers.
Indeed, these are essential traits of a capitalistic economy. It is true that
this applies primarily to wants which are not of the highest degree of
necessity, hut even types of food provision and housing are importantly
determined by the producers in a capitalistic economy.

12. Calculations in Kind

Calculations in kind can occur in the most varied form. We speak of
a "money economy," meaning an economy where the use of money is
typical and where action is typically oriented to market situations in
terms of money prices. The term "natural economy" CNatundwinschafi),
on the other hand, means an economy where money is not used. The
different economic systems known to history can be classified according
to the degree to which they approximate the one or the other.

The concept "natural economy" is not, however, very definite, since
it can cover systems with widely varying structures. It may mean (a) an
economy where no exchange at all takes place or (b) one where exchange
is only by barter, and thus money is not used as a medium of exchange.
The first type may be an individual economic unit organized on a com-
pletely communistic basis, or with some determinate distribution of
rights of participation. In both cases, there would be a complete lack of
autonomy or autocephaly of the component parts. This may l>e called a
"closed household economy." Or, secondly, it may be a combination of
otherwise autonomous and autocephalous individual units, all of which,
however, are obligated to make contributions in kind to a central or-
ganization which exists for the exercise of authority or as a communal
institution. This is an "economy based on payments in kind" Coikos
economy, "Iiturgically" organized political group). In both cases, so far
as the pure type is conformed to, there is only calculation in kind.

In the second case, type (b), where exchange is involved, there may
be natural economies where exchange is only by barter without either
the use of money or calculation in money terms. Or there may be econ-
omies where there is exchange in kind, but where calculation is oc-
casionally or even typically carried out in money terms. This was typical
of the Orient in ancient times and has been common everywhere.

For the purposes of analysing calculation in kind, it is only the cases
of type (a) which are of interest, where the unit is either completely
self-sufficient, or the liturgies- are produced in rationally organized per-
manent units, such as would be inevitable in attempting to employ
modern technology in a completely "socialized" economy.

1 2 ] _ Calculations in Kind i o i

Calculation in kind is in its essence oriented to consumption, the

satisfaction of wants. It is, of course, quite possible to have something
analogous to profit-making on this basis. This may occur (a) in that,
without resort to exchange, available material means of production and
labor are systematically applied to the production and transportation of
goods on the basis of calculations, according to which the state of want
satisfaction thus attained is compared with the state which would exist
without these measures or if the resources were Used in another way, and
thus a judgment as to the most advantageous procedure is arrived at. Or
Cb) in a barter economy, goods may be disposed of and acquired by ex-
change,-perhap in systematically repeated barters, though strictly with-
' out the use of money. Such action would be systematically oriented to
securing a supply of goods which, as compared with the state which
would exist without these measures, is judged to establish a more ade-
quate provision for the needs of the unit. It is, in such cases, only when
quantities of goods which are qualitatively similar are compared that it
is possible to use numerical terms unambiguously and without a wholly
subjective valuation. It is possible, of course, to set up a system of in-
kind wages consisting of typical bundles of consumer goods- (Koksww-
Defutate), such as were the in-kind salaries and benefices particularly
of tiis ancient Orient (where they even became objects of exchange
transactions, similar to our government bonds). In the case of certain
very homogenous commodities, such as the grain of the Nile valley, a
system of storage and .trade purely in terms of paper claims to certain
quantities of the commodity was of course technically just as possible
as it is with silver bars under the conditions of fcawco-currencies." What
is more important, it is in that case also possible to express the technical
efficiency of a process of production in numerical terms and thereby
compare it with other types of technical processes. This may be done, if
the final product is the same, by comparing the relative requirements of
different processes in both the quantity and the type of means of produc-
tion. Or, where the means of production are the same, the different
products which result from different production processes may be com-
pared. It is often, ihough by no means always, possible in this way to
secure numerical comparisons for the purposes of important, though sec-
torally restricted, problems. But the more difficult problems of calcula-
^ tion begin when it becomes a question of comparing different kinds of
means of production, their different possible modes of use, and quali-
tatively different final products.

Every capitalistic enterprise is, to be sure, continually concerned with
calculations in kind. For instance, given a certain type of loom and a
certain quality of yarn, it is a question of ascertaining, given certain

I O 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11

other relevant data such as the efficiency of machines, the humidity of
the air, the rate of consumption of coal, lubricating oil, etc., what will be
the product per hour per worker and thus the amount of the product
which is attributable to any individual worker for each unit of time. For
industries with typical waste products or by-products, this can be de-
termined without any use of money accounting and is in fact so de-
termined. Similarly, under given conditions, it is possible to work out, in
technical terms without the use of money, the normally expected annual
consumption of raw materials by the enterprise according to its technical
production capacity, the depreciation period for buildings and machinery,
the typical loss by spoiling or other forms of waste- But the comparison .
of different kinds of processes of production, with the use of different
kinds of raw materials and different ways of treating them, is carried out
today by making a calculation of comparative profitability in terms of
money costs. For accounting in kind, on the other hand, there are
formidable problems involved here which are incapable of objective solu-
tion. Though it does not at first sight seem to be necessary, a modern
enterprise tends to employ money terms in its capital calculations even
where such difficulties do not arise. But this is not entirely fortuitous. In
the case of depreciation write-offs, for example, money accounting is used
because this is the method of assuring the conditions of future produc-
tivity of the business which combines the greatest degree of certainty
with the greatest flexibility in relation to changing circumstances; with
any storing of real stocks of materials or any other mode of provision in
'kind such flexibility would be irrationally and severely impeded. It is
difficult to see, without money accounting, how "reserves" could be built
up without being specified in detail. Further, an enterprise is 'always
faced with the question as to whether any of its parts is operating ir-
rationally: that is, unprofitably, and if so, why. It is a question of de-
termining which components of its real physical expenditures (that is, of
the "costs" in terms of capital accounting) could be saved and, above
all, could more rationally be used elsewhere. This can be determined
with relative ease in an ex-post calculation of the relation between
accounting "costs" and "receipts" in money terms, the former including
in particular the interest charge allocated to that account. But it is ex-
ceedingly difficult to do this entirely in terms of an in-kind calculation,
and indeed it can be accomplished at all only in very simple cases. This,
one may believe, is not a matter of circumstances which could be over-
come by technical improvements in the methods of calculation, but of
fundamental limitations, which make really exact accounting in terms
of calculations in kind impossible in principle.

It is true this might be disputed, though naturally not with arguments

12 ] Calculations in Kind i o 3

drawn from the Taylor system and from the possibility of achieving im-
provements in efficiency by employing a system of bonus points without
the use of money. The essential question is that of how it is possible £0
discover at what -point in the organization it would be profitable to em-
ploy such, measures because there existed at that point certain elements
of irrationality. It is in finding out these points that accounting in kind
encounters difficulties which an ex-post calculation in money terms does
not have to contend with. The fundamental limitations of accounting in
kind as the basis of calculation in enterprises— of a type which would
include the bete rocephalous and heteronomous units of production in a
planned economy — are to be found in the problem of imputation, which
in such a system cannot take the simple form of an ex-post calculation of
profit or loss on the books, but rather that very controversial form which
it has in the theory of marginal utility. In order to make possible a ra-
tional utilization of the means of production, a system of in-kind account-
ing would have to determine "value"-indicators of some kind for the
individual capital goods which could take over the role of the "prices"
- used in book valuation in modern business accounting. But it is not at all
clear how such indicators could be established and, in particular, verified;
whether, for instance, they should vary from one production unit to the
next (on the basis of economic location), or whether they should be
uniform for the entire economy, on the basis of "social utility," that is, of
(present and future") consumption requirements?

Nothing is gained by assuming that, if only the problem of a non-
monetary economy were seriously enough attacked, a suitable accounting
method would be discovered or invented. The problem is fundamental
to any kind of complete socialization. We cannot speak of a rational
"planned economy" so long as in this decisive respect we have no instru-
ment for elaborating a rational "plan,"

The difficulties of accounting in kind become more marked when the
question is considered of whether, from the point of view of efficiently
satisfying the wants of a given group of persons, it is rational to locate a
certain enterprise with a given productive function at one or an alterna-
tive site. The same difficulties arise if we want to determine whether a
given economic unit, from the point of view of the most rational use of
the labor and raw materials available to ft, would do better to obtain cer-
tain products by exchange with other units or by producing them itself.
It is true that the criteria for the location of industries consist of "natural!'
considerations and its simplest data are capable of formulation in non-
monetary terms. (On this' point, see Alfred Weber in the Grundriss der
Sozialokonomik, Part IV [English ed.: The Theory of Location, trsl.
C. J. Friedrich, Chicago 1929]). Nevertheless, the concrete determina-

104 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ol. II

tidn of whether, according to the relevant circumstances of its particular

location, a production unit with a given set of output possibilities or one
with a different set would be rational, is in terms of calculation in kind
capable of solution only in terms of very crude estimates, apart from the
few cases where the solution is given by some natural peculiarity, such
as a unique source of a raw material. But in spite of the numerous un-
knowns which may be present, the problem in money terms is always
capable of a determinate solution in principle.

Finally, there is the independent problem of the comparative im-
portance of the satisfaction of different wants, provision for which is,
under the given conditions, equally feasible! In the last analysis, this
problem is, in at least some of its implications, involved in every par-
ticular case of^the calculations of a productive unit. Under conditions of
money accounting, it has a decisive influence on profitability and thereby
on the direction of production of profit-making enterprises. But where
calculation is only in kind, it is in principle soluble only in one of two
ways: by adherence to tradition or by an arbitary dictatorial regulation
which, on whatever basis, lays down the pattern of consumption and
enforces obedience. Even when that is resorted to, it still remains a fact
that the problem of imputation of the part contributed to the total output
of an economic unit by the different factors of production and by dif-
ferent executive decisions is not capable of the kind of solution which is
at present attained by calculations of profitability in terms of money. It
is precisely the process of provision for mass demand by mass production
so lypical of the present day which would encounter the greatest diffi-
culties.

i . The problems of accounting in kind have been raised in a par-
ticularly penetrating form by Dr. Otto Neuratfi in his numerous works 20
apropos of the tendencies to "socialization" in recent years. The prcfaiem
is a central one in any discussion of complete socialization; that is, that
which would lead to the disappearance of effective prices. It may, how-
ever, be explicitly noted that the fact that it is incapable of rational solu-
tion serves only to point out some of the "costs," including economic
ones, which would have to be incurred for the sake. of enacting this type
of socialism; however, this does not touch the question of the justifica-
tion of such a program, so far as it does not rest on technical considera-
tions, but, like most such movements, on ethical postulates or other forms
of absolute value. A "refutation" of these is beyond the scope of any
science. From a purely technical point of view, however, the possibility
must be considered that the maintenance of a certain density of popu-
lation within a given area may be possible only on the basis of accurate
calculation- Insofar as this is true, a limit to the possible degree of lo-
cialization would be set by the necessity of maintaining a system of
effective prices. That cannot, however, be considered here. It miky be

iz] Calculations in Kind i o 5

noted, though, that the distinction between "socialism" and "social re-
form," if there is any such, should be made in these terms.

2. It is naturally entirely'correct that mere money accounts, whether
they refer to single enterprises, to any number of them, or to all enter-
prises — indeed, even the most complete statistical information about the
movement of goods in money terms — tell us nothing whatever about the
nature of the real provision of a given group with what it needs;
namely, real articles of consumption. Furthermore, the much discussed
estimates of "national wealth" in money terms are only to be taken seri-
ously so far as they serve fiscal en^.s; that is, as they determine taxable
weakh. This stricture does not £pply, of course, in any similar degree
to income statistics in money terms, provided the prices of goods in
money are known. But even then there is no possibility of checking real
welfare in terms of substantive rationality. It is further true, as has been
convincingly shown for the case of extensive farming in the Roman
campcgna by Sismondi and Sombart, 21 that satisfactory profitability,
which in the camfagna existed for all participants, in numerous cases
has nothing to do with an optimum use of the available productive re-
sources for the provision of consumers' goods for a given population.
The mode of appropriation, especially that of land (this much must be
conceded to Franz Oppenheimer), 22 leads to a system of claims to rent
and earnings of various kinds which may well obstruct permanently the
development of a technical optimum in the exploitation of productive
resources. This is, however, very far from being a peculiarity of capital-
istic economies. In particular, the much-discussed limitation of produc-
tion in the interest of profitability was very highly developed in the
economy of the Middle Ages, and the modern lahor movement is ac-
quiring a position of power which may lead to similar consequences. But
there is no doubt that this phenomenon exists in the modem capitalistic
economy.

The existence of statistics (or estimates) of money Sows has not, as
some writers have tended to give the impression, hindered the develop-
ment of statistics of physical quantities. This is true, however much fault
we may find with the available statistics when measured by ideal stand-
ards. Probably more than nine-tenths of economic statistics are not in
terms of money, but of physical quantities.

The work of a whole generation of economists has been concentrated
almost entirely on a critique of the orientation of economic action to
profitability with respect to its effects on the provision of the population
with real goods. All the work of the so-called "socialists of the lectern"
(Kathedersozialisten) was, in the last analysis, quite consciously con-
cerned with this. They have, however, employed as a standard of judg-
ment a mode of social reform oriented to social welfare, implving (in ■
contrast to a moneyless economy) the continued existence of effective
prices, rather than full socialization, as the only solution possible either
at the present or at any time in an economy at the stage of mass produc-
tion. It is, of course, quite possible to consider this merely a half-
measure, but it is not in itself a nonsensical attitude. It is true that the
problems of a non-monetary economy, and especially of the possibility

I O 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION f Ck. II

of rational action in terms of calculations in kind, have not received
much attention. Indeed most of the attention they have received has
been historical and not concerned with present problems. But the World
War, like* every war in history, has brought these problems emphati-
cally to the fore in the form of the problems of war economy and the
post-war adjustment. It is, indeed, one of the merits of Otto Neurath
to have produced an analysis of just these problems, which, however
much it is open to criticism both in principle and in detail, was one of
the first and was very penetrating. That "the profession" has taken little
notice of his work is not surprising because until now he has given us
only stimulating suggestions, which are, however, so very broad that it
is difficult to use them as a basis of intensive analysis. The problem only
begins at the point where his public pronouncements up to date have
left off.

3. It is only with the greatest caution that the results and methods of
war economy can be used as a basis for criticizing the substantive ration-
ality of forms of economic organization. In wartime the Wiole economy
is oriented to what is in principle a single clear goal, and the authorities
are in a position to make use of powers which would generally not be
tolerated in peace except in cases where the subjects are "slaves" of an
authoritarian state. Furthermore, it is an economy with an inherent atti-
tude of "going for broke": the overwhelming urgency of the immediate
end overshadows almost all concern for the post-war economy. Only on
the engineering level does preciseness of calculations exist, but economic
constraints on the consumption, especially of labor and of all materials
not directly threatened with exhaustion, are only of the roughest nature.
Hence calculation has predominantly, though not exclusively, a techni-
cal character. So far as it has a genuinely economic character — that is, so
far as it takes account of alternative ends and not only of means for a given
end— it is restricted to what is, from the standpoint of careful monetary
calculation, a relatively primitive ievel of calculation on the marginal
utility principle. In type this belongs to the class of budgetary calculations,
and it is not meant to guarantee long-run rationality for the chosen alloca-
tion of labor and the means of production. Hence, however illuminating
the experience of war-time and post-war adjustments is for the analysis of
the possible range of variation of economic forms, it is unwise to draw con-
clusions from the type of in-kind accounting associated with it for its suit-
ability in a peacetime economy with its long-run concerns.

It may be freelv conceded: (O That it is necessary also in money
accounting to make arbitrary assumptions in connection with means of
production which have no market price. This is particularly common in
the case of agricultural accounting; (2) that to a less extent something
similar is true of the allocation of overhead costs among the different
branches of a complicated enterprise; (3) that the formation of cartel
agreements, no matter how rational their basis in relation to the market
situation may be, immediately diminishes the stimulus to accurate cal-
culation on the basis of capital accounting, because calculation declines
in the absence of an enforced objective need for it. If calculation were
in land, however, the situation described under (1) would be universal;

12 ] Calculations in Kind 107

any type of accurate allocation of overhead costs, which, however
roughly, is now somehow achieved in money terms, would become im-
possible; and, finally, every stimulus to exact calculation would be elimi-
nated and would have to be created anew by artificial means, the effec-
tiveness of which would be questionable.

It has been suggested that the huge clerical staff of the private sector
of the economy, which is actually to a large extent concerned with cal-
culations, should be turned into a universal Statistical Office which
would have the function of replacing the monetary business accounting
of the present system with a statistical accounting in kind. This idea not
only fails to take account of the fundamentally different motives under-
lying "statistics" and "business accounting," it also fjils to distinguish
their fundamentally different functions. They differ just like the bureau-
crat differs from the entrepreneur,

4. Both calculation in kind and in money are rational techniques.
They do not, however, by any means exhaust die totality of economic
action. There also exist types of action which, though actually oriented
to economic considerations, do not know calculation. Economic action
may be traditionally oriented or may be affectually determined. In its
more primitive aspects, the search for food on the part of human beings
' is closely related to that of animals, dominated as the latter is by in-
stinct. Economically oriented action dominated by a religious faith, by
war-like passions, or by attitudes of personal loyalty and similar modes
of orientation, is likely to have a very low level of rational calculation,
even though the motives are fully self-conscious. Haggling is excluded
"between brothers," whether they be brothers in kinship, in a guild, or
in a religious group. It is not usual to be calculating within a family, a
group of comrades, or of disciples. At most, in cases -of necessity, a rough
sort of rationing is resorted to, which is a very modest beginning of cal-
culation. In Part Two, ch. IV, the process by which calculation gradually
penetrates into the earlier form of family communism will be taken u^
Everywhere it has been money which was the propagator of calculation.
This explains the fact that calculation in kind has remained on an even
lower technical level than the actual nature of its problems might have
necessitated; hence in this respect Otto Neurath appears to be right.

During the printing of this work an essay by Ludwig von Mises
dealing with these problems came out. See his "Die Wirtschaftsrech-
nung im sozialistischen Gemeinwesen," Arckiv fur Soziahmssenschaft,
vol. 47(1920).**

13. Substantive Conditions of Formal Rationality in a ,
Money Economy

It is thus clear that the formal rationality of money calculation is
dependent on certain quite specific substantive conditions. Those which
are of a particular sociological importance for present purposes are the

I O 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

following: (O Market struggle of economic units which are at least rela-
tively autonomous. Money prices are the product of conflicts of interest
and of compromises; they thus result from power constellations. Money
is not a mere "voucher for unspecified utilities," which could be altered
at will without any fundamental effect on the character of the price sys-
tem as a struggle of man against man. "Money" is, rather, primarily a
weapon in this struggle, and prices are expressions of the struggle; they
are instruments of calculation only as estimated quantifications of relative
chances in this struggle of interests. (2) Money accounting attains the
highest level of rationality, as an instrument of calculatory orientation of
economic action, when it is applied in the form of capital accounting. ^
The substantive precondition here is a thorough market freedom, that is,
the absence of monopolies, both of the imposed and economically irra-
tional and of the voluntary and economically rational (i.e., market-
oriented) varieties. The competitive struggle for customers, which is
associated with this state, gives rise to a great volume of expenditures,
especially with regard to the organization of sales and advertising, which
in the absence of competition — in a planned economy or under complete
monopolization — would not have to be incurred. Strict capital account-
ing is further associated with the social phenomena of "shop discipline"
and appropriation of the means of production, and that means: with the
existence of a "system of domination" (Hemchaftsverhiiltniss). (3) It is
not "demand" (wants) as such, but "effective demand" for utilities which,
in a substantive respect, regulates the production of goods by profit-
making enterprises through the intermediary of capital accounting.
What is to be produced is thus determined, given the distribution of
wealth, by the structure of marginal utilities in the income group which
has both the inclination and the resources to purchase a given utility.
In combination with the complete indifference of even the formally
most perfect rationality of capital accounting towards all substantive
postulates, an indifference which is absolute if the market is perfecdy
free, the above statement permits us to see the ultimate limitation, in-
herent in its very structure, of the rationality of monetary economic
calculation. It is, after all, of a purely formal character. Formal and
substantive rationality, no matter by what standard the latter is measured,
are always in principle separate things, no matter that in many (and
under certain very artificial assumptions even in all) cases they may
coincide empirically. For the formal rationality of money accounting does
not reveal anything about the actual distribution of goods. This must
always be considered separately. Yet, if the standard used is that of the
provision of a certain minimum of subsistence for the maximum size of
population, the experience of the last few decades would seem to show

13 ] Substantive Conditions of Formal Rationality i o 9

that formal and substantive rationality coincide to a relatively high
degree. The reasons lie in the nature of the incentives which are set into
motion by the type of economically oriented social action which alone is
adequate to money calculations. But it nevertheless holds true under all
circumstances that formal rationality itself does not tell us anything about
real want satisfaction unless it is combined with an analysis of the dis-
tribution of income."

14. Market Economies and Planned Economies

Want satisfaction will be said to take place through a "market econ-
omy" so far as it results from action oriented to advantages in exchange
on the basis of self-interest and where co-operation takes place only
through the exchange process. It results, on the other hand, from a
"planned economy" so far as economic action is oriented systematically
to an established substantive order, whether agreed or imposed, which is
valid within an organization.

Want satisfaction through a market economy normally, and in propor-
tion to the degree of rationality, presupposes money calculation. Where
capital accounting is used it presupposes the economic separation of the
budgetary unit (household) and the enterprise. Want satisfaction by
means of a planned economy is dependent, in ways which vary in kind
and degree according to its extensiveness, on calculation in kind as the
ultimate basis of the substantive orientation of economic action. For-
mally, however, the action of the producing individual is oriented to the
instructions of an administrative staff, the existence of which is in-
dispensable. In a marke't economy the individual units are autocephalous
and their action is autonomously oriented. In the administration of
budgetary units (households), the basis of orientation is the marginal
utility of money holdings and of anticipated money income; in the case
of intermittent entrepreneurship CGelegenheitserwerhen), the probabili-
ties of market gain, and in the case of profit-making enterprises, capital
accounting are the basis of orientation. In a planned economy, all eco-
nomic action, so far as "planning" is really carried through, is oriented
heteronomously and in a strictly "budgetary" manner, to rules which
enjoin certain modes of action and forbid others, and which establish a
system of rewards and punishments. When, in a planned economy,
die prospect of additional individual income is used as a means of stimu-
lating self-interest, the type and direction of the action thus rewarded is
substantively heteronomously determined. It is possible for the same
thing to be true of a market economy, though in a formally voluntary

I I O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION f Ch. 11

way. This is true wherever the unequal distribution of wealth, and
particularly of capital goods, forces the non-owning group to comply
with the authority of others in order to obtain any return at all for the
utilities they can offer on the market — either with the authority of a
wealthy householder, or with the decisions, oriented to capital accounting,
of the owners of capital or of their agents. In a purely capitalistic organiza-
tion of production, this is the fats of the entire working class.

: - The following are decisive as elements of the motivation of economic
activity under the conditions of a market economy: ( i ) For those without
substantial property: (a) the fact that they run the risk of going entirely ,
without provisions, both for themselves and for those personal depend-
ents, such as children, wives, sometimes parents, whom the individual
typically maintains on his own account; (b) that, in varying degrees sub-
jectively they value economically productive work as a mode of life.
(2) For those who enjoy a privileged position by virtue of wealth or the
education which is usually in turn dependent on wealth: (a) opportuni-
ties for large income from profitable undertakings; (b) ambition; (c) the
valuation as a "calling" of types of work enjoying high prestige, such as
intellectual work, artistic performance, and work involving high tech-
nical competence. (3) For those sharing in the fortunes of profit-making
enterprises: (a) the risk to the individual's own capital, and his own op-
portunities for profit, combined with (b) the valuation of rational acquisi-
tive activity as a "calling." The latter may be significant as a proof of the
individual's own achievement or as a symbol and a means of autonomous
control over the individuals subject to his authority, or of control over
economic advantages which are culturally or materially important to an
indefinite plurality of persons — in a word, power.

A planned economy oriented to want satisfaction must, in proportion
as it is radically carried through, weaken the incentive to labor so far as
the risk of lack of support is involved. For it would, at least so far as there
is a rational system of provision for wants, be impossible to allow a
worker's dependents to suffer the full consequences of his lack of effici-
ency in production. Furthermore, autonomy in the direction of organized
productive units would have to be greatly reduced or, in the extreme
case, eliminated. Hence it would be impossible to retain capital risk and
proof of merit by a formally autonomous achievement. The same would
be true of autonomous power over other individuals and important fea-
tures of their economic situation. Along with opportunities for special
material rewards, a planned economy may have command over certain
ideal motives of wliat is in the broadest sense an altruistic type, which
can be used to stimulate a level of achievement in economic production
comparable to that which autonomous orientation to opportunities for

14 ] Market Economies and Planned Economies i i i

profit, by producing for the satisfaction of effective demand, has em-
pirically been able to achieve in a market economy. Where a planned
economy is radically carried out, it must further accept the inevitable
reduction in formal, calculator^ rationality which would result from the
elimination of money and capital accounting. Substantive and formal (in
the sense of exact calculation') rationality are, it should be stated again,
after all largely distinct problems. This fundamental and, in the last
analysis, unavoidable element of irrationality in economic systems is one
of the important sources of all "social" problems, and above all, of the
problems of socialism.

The following remarks apply to both sees. 13 and 14.

1. The above exposition obviously formulates only things which are
generally known, in a somewhat more precise form. The market econ-
omy is by far the most important case of typical widespread social action
predominantly oriented to "self-interest." The process by which this type
of action results in the satisfaction of wants is the subject matter of eco-
nomic theory, knowledge of which in general terms is here presupposed.
The use of the term "planned economy" (Planwirtschaft) naturally does
not imply acceptance of the well-known proposals of the former German
Minister of Economic Affairs. 26 The term has been chosen because,
while it does not do violence to general usage, it has, since it was used
officially, been widely accepted. This fact makes it preferable to the term
used' by Otto Neurath, "administered economy" (yerwaltungswirt-
schaft), which would otherwise be suitable.

2. So far as it is oriented to profit-making, the economic activity of
organizations, or that regulated by organizations, is not included in the
concept of "planned economy," whether the organization be a guild, a
cartel, or a trust. "Planned economy" includes the economic activity of or-
ganizations only so far as it is oriented to the provision for needs. Any
system of economic activity oriented to profit-making, no matter how
strictly it is regulated or how stringently controlled by an administrative
staff, presupposes effective prices, and thus capital accounting as a basis
of action; this includes the limiting case of total cartellization, in which
prices would be determined by negotiation between the cartel groups
and by negotiated wage agreements with labor organizations. In spite of
the identity of their objectives, complete socialization in the sense of a
planned economy administered purely as a budgetary unit and partial
socialization of various branches of production with the retention of cap-
ital accounting are technically examples of quite different types. A pre-
liminary step in the direction of the budgetary planned economy is to he
found wherever consumption is rationed or wherever measures are taken
to effect the direct "in-kind" distribution of goods. A planned direction
of production, whether it is undertaken by voluntary or authoritatively
imposed cartels, or by agencies of the government, is primarily con-
cerned with a rational organization of the use of means of production
and labor resources and cannot, on its own terms, do without price

112 SOCIOLOGICAL ' CATEGORIES OF ECONOMIC ACTION [ Ch. 11

or at least, not yet. It is thus by no means fortuitous that the "rationing-
type" of socialism gets along quite well with the "works councils" (Be-
triebsrate') type of socialism which, against the will of its leading person-
alities (who are in favor of a rationalistic solution), must pursue the
income interests of the workers.

3. It will not be possible to enter at this point into a detailed discus-
sion of the formation of such economic organizations as cartels, corpora-
tions or guilds. Their general tendency is orientation to the regulation or
monopolistic exploitation of opportunities for profit. They may arise by
voluntary agreement, but are more generally imposed even where for-
mally voluntary. Compare in the most general terms, chap. I, sec. 10,
and also the discussion of the appropriation of economic advantages, sec.
ioff. of the present chapter.

The conflict between two rival forms of socialism lias not died down
since the publication of Marx's Mis&re de la Philosophic. On the one
hand, there is the type, which includes especially the Marxists, which
is evolutionary and oriented to the problem of production; on the other,
the type which takes the problem of distribution as its starting point and
advocates a rational planned economy. The latter is again tcday corning
to be called "communism." The conSict within the Russian socialist
movement, especially as exemplified in the passionate disputes between
Plekhanov and Lenin, was, after all, also concerned with this issue.
While the internal divisions of present-day socialism are very largely
concerned with competition for leadership and for "benefices." along with
these issues goes the same set of problems. In particular, the economic (
experience of the War has given impetus to the idea of a planned econ-
omy, but at the same time to the development of interests in appropria-
tion.

The question of whether a planned economy, in whatever meaning
or extent, should be introduced, is naturally not in this form a scientific
problem. On scientific grounds it is possible only to inquire, what would
be the probable results of any given specific proposal, and thus what
consequences would have to be accepted if the attempt were made. Hon-
esty requires that all parties should admit that, while some of the factors
are known, many of those which would be important are only very par-
tially understood. In the present discussion, it is not possible to enter
into the details of the problem in such a way as to arrive at concretely
conclusive results. The points which will be taken up can be dealt with
only in a fragmentary way i:i connection with forms of organizations,
particularly the state. It was possible above only to introduce an un-
avoidably brief discussion of the most elementary aspects of the techni-
cal problem. The phenomenon of a regulated market economy has, for
the reasons noted above, not yet been taken up.

4. The organization of economic activity on the basis of a market
economy presupposes the appropriation of the material sources of utili-
ties on the one hand, and market freedom on the other. The effective-
ness of market freedom increases with the degree to which these sources
of utility, particularly the means of transport and production, are ap-

14 ] Market Economies and Planned Economies i i 3

propriated. For, the higher the degree of marketability, the more will
economic action be oriented to market situations. But the effectiveness
of market freedom also increases with the degree to which appropriation
is limited to material sources of utility. Every case of the appropriation
of human beings through slavery or serfdom, or of economic advantages
through market monopolies, restricts the range of human action which
can be market-oriented. Fichte, in his Der geschlossene Handelsstaat
(Tubingen, 1800), was right in treating this limitation of the concept
of "property" to material goods, along with the increased autonomy of
control over the objects which do fall under this concept, as characteris-
tic of the modern market-oriented system. All parties to market relations
have had an interest in this expansion of property rights because it in-
creased the area within which they could orient their action to the op-
portunities of profit offered by the market situation. The development
of this type of property is hence attributable to their influence.

5. For reasons of accuracy of expression, we have avoided the term
"communal economy" (_GemeinwirtschafO, which others have frequently
used [in the German discussions of 1 918-1920], because it pretends the
existence of a "common interest" or of a "feeling of community" (G«-
meinschaftsgefuhY) as the normal thing, which conceptually is not re-
quired: the economic organization of a feudal lord exacting corvee labor
or that of rulers like the Pharaohs of the New Kingdom belongs to the
same category as a family household. Both are equally to be distin-
guished from a market economy.

6. For the purposes of the definition of a "market economy," it is in-
different whether or to what extent economic action is "capitalistic," that
is, is oriented to capital accounting. This applies also to the normal case
of a market economy, that in which the satisfaction of wants is effected
in a monetary economy. It would be a mistake to assume that the devel-
opment of capitalistic enterprises must occur proportionally to the
growth of want satisfaction in the monetary economy, and an even larger
mistake to believe that this development must take the form it has as-
sumed in the Western world. In fact, the contrary is true. The extension
of money economy might well go hand in hand with the increasing
monopolization of the larger sources of profit by the oikos economy of a
prince. Ptolemaic Egypt is an outstanding example. According to the
evidence of the accounts which have survived, it was a highly developed
money economy, but its accounting remained budgetary accounting and -*
did not develop into capital accounting. It is also possible that with the
extension of a money, economy could go a process of "feudal ization"
(Verpfrundung) of fiscal advantages resulting in a traditionalistic stabi-
lization of the economic system. This happened in China, as will have
to be shown elsewhere. Finally, the capitalistic utilization of money
resources could take place through investment in sources of potential
profit which were not oriented to opportunities of exchange in a free
commodity market and thus not to the production of goods, For reasons
which will be discussed below, this has been almost universally true out-
side the area of the modern Western economic order.

I I 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

15. Types of Economic Division of Labor

Every type of social action in a group which is oriented to economic
considerations and every associative relationship of economic significance
involves to some degree a particular mode of division and organization of
human services in the interest of production. A mere glance at the facts
of economic action reveals that different persons perform different types
of work and that these are combined in the service of common ends,
with each other and with the non-human means of production, in the
most varied ways. The complexity of these phenomena is extreme, but
yet it is possible to distinguish a few types.

Human services for economic purposes may be distinguished as (a)
"managerial," or (b) oriented to the instructions of a managerial agency.
The latter type will be called "labor" for purposes of the following dis-
cussion.

It goes without saying that managerial activity constitutes "labor" in
the most definite sense if labor is taken to mean the expenditure of time
and effort as such. The use of the term "labor" in the sense defined
above, as something distinct from managerial activity, has, however,
come to be generally accepted for social reasons, and this usage will be
followed in the present discussion. For more general purposes, the terms
"services" or "work" CLeistungen') will be used.

Within a social group the ways in which labor or other work may be
carried on may be classified in the following way: (1) technically, ac-
cording to the way in which the services of a plurality of co-operating
individuals are divided up and combined, with each other and with the
non-human means of production, to carry out the technical procedures'
of production; (z) socially. In the first place, classification may be accord-
ing to whether particular services do or do not fall within the jurisdiction
of autocephalous and autonomous economic units, and according to the
economic character of these units. Closely connected with this is classi-
fication according to the modes and extent to which the various services,
the material means of production, and the opportunities for economic
profit used as sources of profit or as means of acquisition, are or are not
appropriated. These factors determine the mode of occupational differen-,
tiation, a social phenomenon, and the organization of the market, an
economic phenomenon; (3) finally, an economic criterion: for every
case of combination of services with each other and with material means
of production, of division among different types of economic units, and
of mode of appropriation, one must ask separately whether they are used
in a context of budgetary administration or of profit-making enterprise.

For this and the following section, compare the authoritative discus-
sion by Karl Biicher in his article "Gewerbe" in the Handworterbvch

1 5 ] Types of Economic Division of Labor i 1 5

der Staatwissensckaften and in his book, Die Entstehung der Volkswirt-
schaft?* These are fundamentally important works. Both the terminol-
ogy and the classification here presented have departed from Bucher*s
only where it seemed necessary for reasons of convenience. There is
little reason to dte other references, for the following exposition does not
pretend to achieve new results, but only to provide a scheme of analysis
useful for the purposes of this work.

1. It should be emphatically stated that the present discussion is
concerned only with a brief summary of the sociological aspects of these
phenomena, so far as they are relevant to its context. The economic
aspect is included only insofar as it is expressed in what are formally
sociological categories. The presentation would be economic in the sub-
stantive sense only if the price and market conditions, which so far have
been dealt with only on the theoretical level, were brought in. But these
substantive aspects of the general problem could be worked into such a
summary introduction only in the form of terse theses, which would
involve some very dubious distortions. The explanatory methods of pure
economics are as tempting as they are misleading. To take an example:
4 It might be argued that for the development of medieval, corporately
regulated, but "free" labor the decisive period should be seen in the
"dark" ages from the tenth to the twelfth century, and in particular in
the situation during that period of the skilled Cpeasant, mining, and
artisan) labor force whose production activity was oriented to the reve-
nue chances of the feudal lords with rights over the land, the persons,
and the courts — powers which were fighting for their separate interests
and competing for these revenue sources. The decisive period for the
development of capitalism could be claimed to be the great chronic price
revolution of the sixteenth century. The argument would be that this
led both to an absolute and a relative increase in the prices of almost all
products of the soil in the West, and hence — on the basis of well-known
principles o* agricultural economics — provided both incentives and pos-
sibilities for market production and thus for production on a large scale;
in part, as in England, this took the form of capitalistic enterprise, and
in part, as in the lands between the Elbe river and Russia, that of
corvee-labor estates. For non-agricultural products, this inflation signified
in most cases a rise in absolute prices, but, it would be argued, rarely
one in relative prices; typically, relative prices for industrial goods would
fall, thus stimulating, so far as the necessary organizational and other
external and subjective preconditions were given, attempts to create
market enterprises able to stand up under competitive conditions. The
claim that these preconditions were not given in Germany would be
adduced to account for the economic decline which started there about
that time. The later consequence of all this, the argument would run,
was the development of capitalist industrial entrepreneurship. A neces-
sary prerequisite for this would be the development of mass markets. An
indication that this was actually happening could he seen in certain
changes of English commercial policy, to say nothing of other phenom-
ena.

In order to verify theoretical reasoning about the substantive eco-

I I 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

nomic conditions of the development of economic structure, theses such
as these and similar ones would have to be utilized. But this is simply
not admissible. These and numerous other equally controversial theories,
even so far as they could be proved not to be wholly erroneous, cannot
be incorporated into the present scheme which is intentionally limited to
sociological concepts. In renouncing any attempt of this sort, however,
the following exposition in this chapter explicitly repudiates any claim
to concrete "explanation" and restricts itself to working out a sociological
typology. The same is true of the previous discussion in that it con-
sciously omitted to develop a theory of money and price determination.
This must be strongly emphasized. For only the facts of the economic
situation provide the fiesh and blood for a genuine explanation of also
that process of development relevant for sociological theory. What can
be done here is only to supply a scaffolding adequate, to provide the
analysis with relatively unambiguous and definite concepts.

It is obvious not only that no attempt is made here to do justice to
the historical aspect of economic development, but also that the typol-
ogy of the genetic sequence of possible forms is neglected. The present
aim is only to develop a schematic system of classification.

2. A common and justified objection to the usual terminology of eco-
nomics is that it frequently fails to make a distinction between the
business "establishment" (Betricfc) and the "firm" QUnternehmung).* 1 In
the area of economically oriented action, "establishment" is a technical
category which designates the continuity of the combination of certain
types of services with each other and with material means of production.
The antithesis of this category is either intermittent action, or action
which is constitutionally discontinuous (such as is found in every house-
hold). By contrast, the antithesis to "firm," which is a category of economic
orientation (to profit), is the "budgetary unit" (Haushalt), which is eco-
nomically oriented to provision for needs. But the classification in terms
of "firro' f and "budgetary unit" is not exhaustive, for there exist actions
oriented to acquisition which cannot be subsumed under the category
"firm." All activity in which earnings are due purely to "work," such as
the activity of the writer, the artist, the civil servant, is neither the one nor
the other. The drawing and consumption of rents and annuities, however,
obviously belong into the category of "budgetary administration."

In spite of this distinction [between the "establishment" and the
"firm"], we have in the earlier discussion used the term "profit-making
establishment" (Erwerbsbetrieb^) wherever continuously coordinated, un-
interrupted entrepreneurial activity was meant; 18 such activity is in fact
unthinkable without the constitution of an "establishment," if only one
consisting of nothing but the entrepreneur's own activity without the aid
of a staff. Our concern so far was mainly to stress the separation of the
household (budgetary unit) and the continuously organized business
establishment. It should now be noted that use of the term "profit-making
establishment" as a substitute for "continuously organized business firm"
is fitting and unambiguous only in the simplest case where the technical
unit, the "establishment," coincides with the economic unit, the "firm."

i 5 ] Types of Economic Division of Labor 1 i 7

In the market economy this need not be the case, For several technically
separate "establishments" can be combined into a single "firm." The latter
is not, of course, constituted through the mere relationship of the various
technical units to the same entrepreneur, but through the fact that in their
exploitation for profit these units are oriented to a coordinated plan; hence
transitional forms are possible. When the term "establishment ' or "enter-
prise" QBetrieb~) is used by itself, it will always refer to such technical
units consisting of buildings, equipment, labor, and a technical manage-
ment, the tatter possibly heteiocephalous and heteronomous — units such
as exist even in the communist economy (as the terminology presently in
use also recognizes). The term "profit-making establishment or enterprise"
will henceforth be used only in cases where the technical and the eco-
nomic unit (the "firm") are identical.

The relation between "establishment" and "firm" raises particularly
difficult terminological questions in the analysis of such categories as
"factory" and "putting-out enterprise." The latter is quite clearly a type of
"firm." In terms of "establishments," it consists of two types of units: a
commercial establishment, and establishments which are component parts
of the workers' households (in the absence of larger workshops such as
' might be organized by master craftsmen as intermediaries under a "hi ring-
boss" system); the household establishments perform certain specified
functions for the commercial establishment, and vice versa. Viewed only
from the point of view of "establishments," the process as a whole cannot
be understood at all; for this it is necessary to employ additional categories,
such as: market, firm, household (of the individual workers), commercial
exploitation of purchased services.

The concept of "factory" could, as has been proposed, be defined in
entirely non-economic terms as a mode of technical organization, leav-
ing aside consideration of the status of the workers, whether free or un-
free, the mode of division of labor, involving the extent of internal
technical specialization, and the type of means of production, whether
machines or tools. That is, it would be defined simply as an organized
workshop. However, it would seem necessary in addition to include in
the definition the mode of appropriation of premises and means of pro-
duction — namely: to one owner — , for otherwise the concept would
become as vague as that of the ergpsterion. 2 * But once this is done, it
would as a matter of principle seem more expedient to classify "factory"
and "putting-out enterprise" as two strictly economic categories of the
"firm" conducted on the basis of capital accounting. In a fully socialist
order the category "factory" could then occur as little as that of "putting-
out enterprise," but only such categories as: workshops, buildings, tools,
shop labor services and domestic labor services of all kinds.

3. The question of stages of economic development will be consid-
ered only insofar as it is absolutely necessary, and then only inci-
dentally. The following points will suffice for the present.

It has fortunately become more common lately to distinguish types
of economic system from types of economic policy.* The stages which
Schonberg first suggested and which, in a somewrsat altered form, have

I I 8 SOCIOLOGICAL CATEGORIES OE ECONOMIC ACTION [ Ck. II

become identified with Schmoller's name, "domestic economy," "village
economy," with the further stages of "seigneurial and princely patri-
monial household economy" "town economy," "territorial economy,"
and "national economy,"" were in his terminology defined by the type
of organization regulating economic activity, But it is not claimed that
even the types of regulation, to which economic activity has been sub-
jected by the different organizations thus classified in terms of the extent
of their jurisdiction, were at all different. Thus the so-called territorial
economic policies in Germany consisted to a large extent simply of an
adoption of the measures developed in the town economy. Furthermore,
such innovations as did occur were not greatly different from the
"mercantilist" policies of those of the patrimonial states which had al-
ready achieved a relatively high level of rationality; they were thus to
that . extent "national economic policies," to use the common term,
which, however, is not very appropriate. This classification, further,
cbarly does not claim that the inner structure of the economic system,
the modes in which work roles were assigned, differentiated, ana com-
bined, the ways in which these different functions were divided be-
tween independent economic units, and the modes of appropriation of
control over labor, means of production, and opportunities for profit, in
any way were correlated with the dimensions of the organizations which
were (potential) agents of an economic policy; above all this classifica-
tion does not claim that they always changed in the same direction with
changes in these dimensions. A comparison of the Western World with
Asia, and of the modern West with that of Antiquity, would show the
untenahility of such an assumption. At the same time, in considering
economic structure, it is by no means legitimate to ignore the existence
or absence of organizations with substantive powers of regulation of
economic activity, nor to ignore essential purposes of their regulation.
The modes of profit-making activity are strongly influenced by such
regulation, hvt it is by no means only political organizations which are
important in this respect.

4. In this connection, as well as others, the purpose of the discus-
sion has been to determine the optimum conditions for the formal
rationality of economic ;icnvity and its relation to the various types of
substantive demands which itiay be made on the economic system.

1 6 . Types of the Technical Division of Labor

From a technical point of view the division of labor may be classified
as follows: CO In the first place, it may vary according to modes of
differentiation and combination of work services as such; (a) They may
vary according to the type of functions (.Leistungen) undertaken by the
same person. He may combine managerial functions with those of carry-
ing ouv specifications; or his work may be specialized in terms of_one or
the other.

i6 ] _ Types of Technical Division of Labor i i 9

The distinction is naturally relative. It is common for an individual
who normally supervises to take a hand in the work from time to time,
as in the case of the peasants with larger holdings. The type cases of
combination of the two functions are: The small peasant, the independ-
ent artisan, or the small boatman.

Further, a given individual may (b) perform functions which are
technically different and contribute to different results, or he may per-
form only technically specialized functions. In the first case, the lack of
specialization may be due to the technical level of work which does not
permit further dividing up, to seasonal variation, or to the exploitation of
labor services as a side line at times when they are not taken up by their
primary occupation. In the second case, the function may be specialized
in terms of the product in such a way that the same worker carries out
all the processes necessary for this product, though they differ technically
from each other. In a sense, this involves a combination of different
functions and will be called the "specification of function." On the other
hand, the functions may be differentiated according to the type of work,
so that the product is brought to completion only by combining, simul-
taneously or successively, the work of a number of persons. This is the
"specialization of function." The distinction is to a large extent relative,
but it exists in principle and is historically important.

The case where there is little division of labor because of the low
technical level is typical of primitive household economies. There, with
the exception of the differentiation of sex roles (of which more in Part
Two, ch. III) every individual performs every function as the occasion
arises. Seasonal variation has been common in the alternation of agri-
cultural work in the summer with the crafts in the winter. An example
of side lines is the tendency for urban workers to take up agricultural
work at certain times, such as the harvest, and also the various cases of
secondary functions undertaken in otherwise free time, which is com-
mon even in modem offices.

The case of specification of function is typical of the occupational
structure of the Middle Ages: a large number of crafts, each of which
specialized in the production of a single article, completely unperturbed by
the technical heterogeneity of the functions involved. There was thus a
combination of functions. The specialization of functions, on the other
hand, is crucial to the modern development of the organization of labor.
There are, however, important physiological and psychological reasons
why it has virtually never been pushed to the absolute extreme of isola-
tion, even on the highest levels of specialization. There is almost always
an element of specification of function involved. It is not, however, as in
the Middle Ages, oriented to the final product.

(2) The differentiation and combination of different functions may
further vary according to the modes in which the services of a plurality
of persons are combined to achieve a co-ordinated result. There are two

I 2 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

main possibilities: (a) the "accumulation" of functions; that is the em-
ployment of a number of persons all performing the same function to
achieve a result. This may take the form either of identical, but tech-
nically independent efforts co-ordinated in parallel, or of identical efforts
organized technically into a single collective effort.

Examples of the first case are the functions performed by mowers or
road pavers, several of whom work in parallel. The second type was ex-
emplified on a grand scale in ancient Egypt in such cases as the transporta-
tion of huge stones by thousands of workers, large numbers of them
performing the same acts, such as pulling on ropes, on the same object.

The second type, (b) is the "combination" of functions — that is, of
efforts which are qualitatively different, and thus specialized — in order to
achieve a result. These erTorts may be technically independent and either
simultaneous or successive; or they may involve technically organized
co-operation in the simultaneous performance of technically comple-
mentary efforts.

i. A particularly simple example of simultaneous, technically inde-
pendent functions is furnished by the parallel spinning of the warp and
the woof for a given cloth. In the same class are to be placed a very
large number of processes which are, from a technical point of view,
undertaken independently, but are all designed as part of the produc-
tion of the same final product.

2. An example of the successive type of technically independent
processes is furnished by the relation of spinning, weaving, Fulling,
dyeing, and finishing. Similar examples are to be found in every in- ,
dustry.

3. The combination of specialized functions is found all the way
from the case of an assistant holding a piece of iron while a blacksmith
forges it, a case which is repeated in every modem foundry, to the com-
plicated situations, which, though not specific to modem factories, are
an important characteristic of them. One of the most highly developed
types outside the factory is the organization of a symphony orchestra or
of the cast of a theatrical production.

1 7. Types of the Technical Division of Labor —
(Continued)

The division of labor efforts varies also, from a technical point of
view, in terms of the extent and nature of combinations with comple-
mentary material means of production.

1 . Forms may vary according to whether they consist purely in per-
sonal services, as in the case of wash-women, barbers, the performance of

l 7 ] TyP es °f Technical Division of Labor (cont.) i 2 1

actors, or whether they produce or transform goods by "working up" or
transporting raw materials. The latter may consist in construction work,
as that of plasterers, decorators, and stucco workers, in production of
commodities and in transport of commodities. There are many transi-
tional forms between them.

2. They may be further distinguished according to the stage at
which they stand in the progression from original raw material to con-
sumption: thus, from the original products of agriculture and mining to
goods which are not only ready to be consumed, but available at the
desired place for consumption.

3. The forms may further vary according to the ways in which they
use: (a) Fixed plant and facilities (Anlagen). These may consist in
sources of power; that is, means of harnessing energy, either that of
natural forces, such as the power of water, wind, or heat from fire, or
that which is produced mechanically, especially steam and electrical
power, or in special premises for work, or they may use (b) implements
of work (ArbeitsmitteV), which include tools, apparatus, and machines.
In some cases only one or another of these means of production may be
used, or none. "Tools" are those aids to labor, the design of which is
adapted to the physiological and psychological conditions of manual
labor. "Apparatus" is something which is "tended" by the worker.
"Machines" are mechanized apparatus. These rather vague distinctions
have a certain significance^For characterizing epochs in the development
of industrial technology.

The use of mechanized sources of power and of machinery, char-
acteristic of modem industry, is from a technical point of view due to
their specific productivity and the resulting saving of human labor, and
also to the uniformity and calculability of performance, both in quality
and quantity. It is thus rational only where there exists a sufficiendy
wide demand for the particular types of products. In the case of a market
economy, this means adequate purchasing power for the relevant goods;
and this in rum depends on a certain type of income distribution.

It is quite out of the question here to undertake to develop even the
most modest outline of a theory of the evolution of the technology and
economics of tools and machinery. The concept of "apparatus" refers to
such things as the type of loom which was operated by a foot-pedal and
to numerous other similar devices. These already involve a certain rela-
tive independence on the part of the mechanical process, as distin-
guished from the functioning of the human or, in some cases, the ani-
mal organism. Without such apparatus — which included in particular
various devices for moving materials in mines — machines, with their
importance in modem technology, would never have come into exist-
ence. Leonardo's famous inventions were types of apparatus.

12 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

1 8 . Social Aspects of the Division of Labor

From the social point of view, types of the division of labor may be
classified in the following .way-. In the first place, according to the ways
in which qualitatively different, especially complementary functions, are
distributed among more or less autocephalous and autonomous economic
units, which may further be distinguished economically according to
whether these are budgetary units or profit-making enterprises. There
are two polar possibilities:

(i) A "unitary" economy (Uinheitswinschaft) where the specializa-
tion (or specification) of functions is wholly internal, completely hetero-"
cephalous and heteronomous and determined on a purely technical basis.
The same would be true of the co-ordination of functions. A unitary
economy may, from an economic point of view, be either a budgetary
unit or a profit-making enterprise.

' On the largest possible scale, a communist national economy would
be a unitary budgetary economy; on the smallest scale it was the primi-
tive family unit; which included all or the great majority of production
functions in a "closed household economy." The type case of a "unitary"
profit-making enterprise with purely internal specialization and co-
ordination of functions is naturally the great vertical combination"
which treats with outsiders only as an integrated unit. These two dis-
tinctions will suffice for the moment as a treatment of the development
of autonomous unitary economy.

(2) The distribution of functions may, on the other hand, take place
between autocephalous economic units, (a) It may consist in the spe-
cialization or specification of functions between heteronomous, but auto-
cephalous units which are oriented to an order established by agreement
or imposed. The order, in turn, may be substantively oriented in a variety
of ways. Its main concern may be to provide for the needs of a superior
economic unit, which may be the budgetary unit (household) of a lord,
an oikos, or it may be oriented to profit-making for an economic unit
controlled by 3 political body or lord. The order may, on the other hand,
be concerned with providing for the needs of the members of some
closed group {genossenschaftHcher Verband). From an economic point
of view, this may be accomplished .either in the "budgetary" (household)
or in the "profit-making" mode. The organization in all these cases may
either be confined to the mere regulation of economic activity or it may,
at the same time, be engaged in economic action on its own account,
(b) The other main type is the specialization of autocephalous and
autonomous units in a market economy, which are oriented on the one
hand substantively only to their own self-interest, formally only to the

i8 ] Social Aspects of the Division of Labor i 2 3

brder of an organization such as the laissez-faire state, which enforces
only formal, rather than substantive rules (See above, chap. II, sec. 5-"d).

1. A typical example of the organization which, limiting its function
to the regulation of economic activity, takes the form of a budgetary
unit administered by an association of the members under case 2GO, is
the organization of village handicrafts in India ("establishment"). An
organization with autocephalous but heteronomous units '■ oriented in
their economic activity to the household of a lord, as under 2(a), may
be illustrated by structures which provide for the household wants of
princes or landlords (in the case of princes, also for the political wants)
by means of contributions from the individual holdings of subjects, de-
pendents, serfs, slaves, cottars, or sometimes "demiurgic" (see below)
village artisans, such are found everywhere in the world. The exactions
of services or products for a landlord or a town corporation should usu-
ally be classified as "mere regulation of economic activity," insofar as
they usually served only fiscal, not substantive ends. A case of market
order with units oriented to profit-making for the lotd exists where
putting-out type production tasks contracted for are reallocated to the
individual households.

The types where there is specialization and specification of function
between heteronomous units under the aegis of a co-operative organiza-
tion can be illustrated by the specialization common in many very old
small-scale industries. The Solingen metal trades were originally organ-
ized in terms of a voluntary association determining the division of labor
by agreement. It was only later that they became organized in terms of
domination, namely as a "putting-out industry." The type where the
autocephalous economic units are subject only to regulation by an
organization is illustrated by innumerable cases of the rules established
by village communities and town corporations for the regulation of trade,
so far at least as these have a substantive influence on the processes of
production.

The case of specialization as between autonomous and autocephalous
units in a market economy is best illustrated by the modem economic
. order.

2. A few further details may be added. The order of the organiza-
tions which attempt to provide for the wants of their members on a

' budgetary basis is 'budgetary" in a particular way — that is, it is oriented
to the prospective needs of the individual members, not of the organized
group, such as a village itself. Specified service obligations of this kind
will be called "demiurgic liturgies," 33 and this type of provision for
needs, correspondingly, "demiurgic provision." It always is a question of
corporate regulation governing the division of labor and, in some cases,
the mode of combination of labor services.

This term will not, on the other hand, be applied to an organization,
whether it is based on domination or on voluntary co-operation, if it
carries on economic activity on its own account, contributions to which
are sub-allocated on a specialized basis. The type cases of this category

124 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Cfe. II

are the specialized and specified contributions in kind of corvie estates
(Fremfcofs), seigneurial estates, and other types of large household units.
But sub-allocated obligations are also common in various types of organi-
zations which are not primarily oriented to economic ends, such as the
households of princes, political groups and the budgetary administration
of local communities. These contributions are generally for the benefit
of the budgetary needs of the governing authority or for corporate pur-
poses. These in-kind obligations of services and products imposed on
peasants, artisans, and tradesmen will be called "oifeos liturgies in kind"
when they are owed to the household establishment of an individual,
and "corporate liturgies in kind" when they are payable to the budgetary
unit of an organization as such. The principle governing this mode of
provision for the budgetary needs of an organization engaged in eco-
nomic action, is called "liturgical provision." This mode of organization
has played an exceedingly important historical role and will have to be
discussed frequently. In political organizations, it held the place of
modern "public finances," and in economic groups it made possible a
decentralization of the main household by providing for its needs
through actors who were no longer maintained and utilized in it. Each
sub-unit managed its own affairs, but assumed the obligation to fulfill
certain functions for the central unit and to. that extent was dependent
on it. Examples are peasants and serfs subject to various kinds of labor
services and payments in kind; craftsmen attached to an estate; and a
large number of other type;:. Rodbertus 34 was the first to apply the
term "oikos" to the large-scale household economies of Antiquity. He
accepted as the principal criterion the essential autarky of want satisfac-
tion through utilization of the services of household members or of de-
pendent labor, materia] means of production being made available on
a non-exchange basis. It is a fact that the landed estates, and still more
the royal households, of Antiquity, especially of the New Kingdom in
Egypt, were cases where the greater part of the needs of the unit were
provided by services and payments in kind, which were obligations of
dependent household units, although the degree of approach to the pure
type varies widely. The same phenomena are to be found at times in
China? and India, and to a less extent in our own Middle Ages, be-
ginning with the capitulate de villis. 3 ^ It is true that exchange with the
outside was generally not entirely lacking, but it tended to have the
character of budgetary exchange. Obligations to money payment have
also not been uncommon, but have generally played a subsidiary part in
the main provision for needs and have tended to be traditionally fixed.
For the economic units subject to liturgical obligations it also has not
been uncommon to be involved in exchange relations. But the decisive
point is that the bulk of the subsistence of these units was covered by
the in-kind benefits — either in the form of certain quotas of products, or
in that of the use of pieces of land — which they received in compensa-
tion for the liturgical deliveries imposed on them. There are, of course,
many transitional forms. But in each case there is some kind of regula-

i8 ] ~ Social Aspects of the Division of Labor i 2 5

tion of functions by an organization which is concerned with the mode
of division of labor and of its co-ordination.

3. The cases where an organization regulating economic activity is
oriented to considerations of economic profit are well illustrated by those
economic regulations of the communes of medieval Europe, and by the
guilds and castes of China and India, which restricted the number of
master craftsmen and their functions and also the techniques of the
crafts, that is, the way ir which labor was oriented in the handicrafts.
They belonged to this tyoe so far as the rules were intended not pri-
marily to secme provision of the consumer with the products of the
craftsmen, but, as was often though not always the case, to secure the
market position of the artisans by maintaining the quality of perform-
ance and by dividing up the market. Like every other type of economic
regulation, this type also involved limitations on market- freedom and
hence on the fully autonomous business orientation of the craftsmen. It
was unquestionably intended to maintain the "livings" for the existing
craft shops, and to that extent, in spite of its apparent "business" char-
acter, it was more closely related to the budgetary mode of orientation.
■ * 4. The case of an organization itself engaged in economic activity
with an orientation to profit-making can be illustrated, apart from the
pure type of putting-out industry already discussed, by the agricultural
estates of the German East with a labor force holding small plots of
estate land on a service tenure and entirely oriented to the order of the
estate Qnsthute*), or by those of the German NorthAVest with similar
types of tenant labor (Hewer/i«ge) who, however, hold their plots on a
rental basis. The agricultural estates, just like the putting-out industries,
are profit-making organizations of the landlord and the entrepreneur,
respectively. The economic units of the tenants and home-industry
workers are oriented, both in the imposed division of functions and in
the mode of combining work efforts, as in the whole of their economic
conduct, primarily to the obligations which the order of the estate or
the putting-out relationship dictates to them. Apart from that, they are
households. Their acquisitive efforts are not autonomous, but heterono-
nious efforts oriented to the enterprise of the landlord or the entrepre-
neur. Depending upon the degree to which this orientation is substan-
tively standardized, the division of functions may approach the purely
technical type of division within one and the same enterprise which is
typical of the factory.

1 9. Social Aspects of the Division of Labor —
(Continued)

From a social point of view, the modes of the division of labor may bv
further classified according to the mode in which the economic advan-
tages, which are regarded as returns for the different functions, are ap-

I 2 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

propriated. Objects of appropriation may be: the opportunities of
disposing of, and obtaining a return from, human labor services QLeis-
tungsverwertungsckancerO; the material means of production;* 8 and the
opportunities for profit from managerial functions. 41 (On the sociological
concept of appropriation, see above, chap. I, sec. i o).

When the utilization rights for labor services are appropriated, the
services themselves may either, (i) go to an individual recipient (a lord)
or to an organization, or (2) they may be sold on the market. In either
case one of the following four, radically different, possibilities may ap-

(a) Monopolistic appropriation of the opportunities for disposal of
labor services by the individual worker himself: the .case of "craft-
organized free labor." The appropriated rights may either be hereditary
and alienable, in which case type (1) above is illustrated by the Indian
village artisan and type (2) by certain medieval non-personal craft
rights; or they may be strictly personal and inalienable, as under type
CO all "rights to an office"; or, finally, they may be hereditary, but
inalienable, as under types (O and (2) certain medieval, but above all
Indian, craft rights, and medieval "offices" of the most diverse kind. In
all these cases appropriation may be unconditional or subject to certain
substantive conditions.

(b) The second possibility is that the right of utilization of labor
services is appropriated to an "owner" of the worker: the case of "unfree
labor." The property rights in the worker may be both hereditary and
alienable — the case of slavery proper. Or, though it is hereditary, it may
not be freely alienable, but, e.g., only together with the material means
of production, particularly the land. This includes serfdom and heredi-
tary dependency.

The appropriation of the use of labor by a lord may be limited by
substantive conditions, as in serfdom. The worker cannot leave his status
of his own free will, but neither can it arbitrarily be taken from him.

The appropriated rights of disposal of labor services may be used by
the owner for .purposes of budgetary administration, as a source of
income in kind or in money, or as a source of labor services in his house-
hold, as in the case of domestic slaves or serfs. Or it may be used as a
means of profit. In that case the dependent may be obligated to deliver
goods or to work on raw materials provided by the owner. The owner
will then sell the product. This is unfree domestic industry. He may,
finally, use his laborer in an organized shop — a slave or serf workshop.

The person herein designated as the "owner" may be involved in the
work process himself in a managerial capacity or even in part as a work-

la ] Social Aspects of ike Division of Labor (cont.) 127

er, but this need not be true. It may be that his position as owner, if so
facto, makes him the managing agent. But this is by no means neces-
sary and is very generally not the case.

The use of slaves and serfs, the latter including various types of
dependents, as part of a process of budgetary administration and as
source of rent revenue, but not as workers in a profit-making enterprise,
was typical of Antiquity and of the early Middle Ages. There are, for
instance, cuneiform inscriptions which mention slaves of a Persian
prince who were bound out as apprentices, possibly to be used later for
labor services in the household, but perhaps to be set to work in sub-
stantive freedom for their own customers, making a regular payment to
the owner (an early equivalent of the Greek airo<f>opa, the Russian
ohrok, and the German Hals- or Leihzins). Though by no means
without exception, this tended to be the rule for Greek slaves; and in
Rome this type of independent economic activity with a peculium or
merx -peculiaris and, naturally, payments to the owner, found reflection
in various legal institutions. In the Middle Ages, body serfdom Q^eib-
herrschaft) frequently involved merely a right to claim payments from
' otherwise almost' independent persons. This was usual in western and
southern Germany. In Russia, also, de facto limitation to the receipt of
these payments (obrok*) from an otherwise independent serf was, if not
universal, at least very common, although the legal status of these per-
sons remained precarious.

The use ofunfree labor for "business" purposes has taken the follow-
ing principal forms, particularly in the domestic industries on seigneur-
ial estates, including various royal estates, among them probably those of
the Pharaohs: (1) Unfree obligation to payments in kind — the delivery
of goods in kind, the raw material for which was produced by the work-
ers themselves as well as worked on by them. Flax is an example; (2)
unfree domestic industry — work on material provided by the lord. The
product could be sold at least in part for money by the lord. But in
many cases, as in Antiquity, the tendency was to confine market sale to
occasional instances. In early modern times, however, particularly in the
German-Slavic border regions this was not the case; it was there, though
. not only there, that domestic industries developed on the estates of land-
lords. The utilization in a continuous organization could take the form
of unfree home-industry labor or of unfree workshop labor. Both forms
are common. The latter was one of the various forms of the ergasterion
of Antiquity. It was found on the estates of the Pharaohs, in temple
workshops, and according to the testimony of tomb frescoes, also on the
estates of private owners or lords, in the Orient, in Greece (Demosthe-
nes' shops in Athens), in the Roman estate workshops (see the descrip-
tion by Gummerus), in the Carolingian genitium (that is, a gynaik*
eion), and in more recent times for example in the Russian serf factories
(see Tugan-Baranovskii's book on the Russian factory). 38

(c) The third possibility is the absence of any sort of appropriation:
formally "free" labor, in this sense that the services of labor are the sub-

I 2 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

ject of a contractual relationship which is formally free on both sides.
The contract may, however, be substantively regulated in various ways
through a conventional or legal order governing the conditions of labor.
Freely contracted labor may be used in various ways. In the first
place, in a budgetary unit, as occasional labor (what Bucher calls
Lohnwerfc), either in the household of the employer (Stor^ or in that
of the worker himself (Heimwerk in Biicher's terminology). Or it may
be permanent, again performed in the household of the employer, as in
the case of domestic service, or in that of the worker, as typical of the
colonate. It may, on the other hand, be used for profit, again on an
occasional or a permanent basis; and in both cases either in the worker's
own home or on premises provided by the employer. The' latter is true of
workers on an estate or in a workshop, but especially of the factory.

Where the worker is employed in a budgetary unit, he is directly in
the service of a consumer who supervises his labor. Otherwise, he is in
the service of a profit-making entrepreneur. Though the form is often
legally identical, economically the difference is fundamental. Coloni
may be in either status; but it is more typical for them to be workers in
an oikos. &

(d) The fourth possibility is that opportunities for disposal of labor
services may be appropriated by an organization of workers, either with-
out any appropriation by the individual worker or with important limita-
tions on iuch appropriation. This may involve absolute or relative closure
against outsiders and also prohibition of the dismissal of workers from
employment by management without consent of the workers, or at least
some kind of limitations on power of dismissal.

Examples of the type of appropriation involving closure of the group
are castes of workers or the type of miners' association found in the Me-
dieval mining industry, the organized groups or retainers sometimes
found at courts, or the "thresher tenure" (Dreschgartner') on landed
estates in Germany. This type of appropriation is found throughout the
social history of all parts of the world in an endless variety of forms. The
second type involving limitations on powers of dismissal, which is also
very widespread, plays an important part in the modern situation in the
"closed shop" of trade unions and especially in the "works councils."

Every form of appropriation of jobs in profit-making enterprises by
workers, like the converse case of appropriation of the services of workers
by owners, involves limitations on the free recruitment of the labor force.
This means that workers cannot be selected solely on grounds of their
technical efficiency, and to this extent there is a limitation on the formed.
rationalization of economic activity. Appropriation of jobs also imposes
substantive limitations on technical rationality, namely: (i) it the ex-

19 ] Social Aspects of the Division of Labor (cont.) i 2 9

ploitation fer profit of the products of labor is appropriated by an owner,
through the tendency to restrict the work effort, either by tradition, or
by convention, or by contract; also through the reduction or complete
disappearance (if the worker is fully owned, a slave) of the worker's
own interest in optimal effort; (2) if the exploitation for profit of the
products is also appropriated by the workers, there may be a conflict of
the worker's self-interest, which lies in the maintenance of his traditional
mode of life, with the attempts of his employer to get him to produce
at the optimum technical level or to use other means of production in
place of labor. For employers, there is always the possibility of transform-
ing their exploitation of labor into a mere source of income. Any ap-
propriation of the exploitation of products by the workers thus generally
leads under otherwise favorable circumstances to a more or less complete
expropriation of the owner from management. But it also regularly tends
to place workers in a state of dependence on people with whom they
deal who enjoy a more favorable market position. These, such as putting-
out entrepreneurs, thvm tend to assume a managerial position.

4 1. The very opposite forms of appropriation — that of jobs by work-
ers and that ~£ workers by owners — nevertheless have 'in practice very
similar results. This should not be surprising. In the first place, the two
tendencies are very generally formally related. This is true when appro-
priation of the workers by an owner coincides with appropriation of op-
portunities for jobs by a closed organization of workers, as has happened
in the manor associations. In such cases it is natural that exploitation of
labor services should, to a large extent, be stereotyped; hence, that work
effort should be restricted and that the workers have little self-interest in
the output. The result is generally a successful resistance of workers
against any sort of technical innovation. But even where this does not
occur, the fact that workers are appropriated by an owner means in prac-
tice that he is obliged to make use of this particular labor force. He is
not in a position, like the modern factory manager, to select according
to technical needs, but must utilize those he has without selection. This
is particularly true of slave labor. Any attempt to exact performance from
appropriated workers beyond that which has become traditionally estab-
lished encounters traditional obstacles. These could only be overcome by
the most ruthless methods, which are not without their danger from the
point of view of the owner's self-interest, since they might undermine
the traditionalistic bases of his authority. Hence almost universally the
work effort of appropriated workers has shown a tendency to restriction.
Even where, as was particularly true of eastern Europe at the beginning
of the modem age, this was broken by the power of the lords, the devel-
opment of higher technical levels of production was impeded by the ab-
sence of the selective process and by the absence of any element of self-
interest or own risk-taking on the part of the appropriated workers.

130 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

When jobs have been formally appropriated by workers, the same result
has come about even more rapidly.

2, Appropriation by workers was typical for the development in the
early Middle Ages (10th to 13th century). The Carolingian Beunden* 9
and all other beginnings of large-scale agricultural enterprise declined
and disappeared. The rents and dues paid to landlords and lords holding
rights over persons became stereotyped at a low level; and an increasing
proportion of the products in kind, in agriculture and mining, and of
the money proceeds from the handicrafts, went to the workers. In just
this form this development was peculiar to the Western world. The
principal circumstances which favored it were as follows: ( a ) The fact
that the propertied classes were heavily involved in political and military
activity; (b) the absence of a suitable administrative staff. These two
. circumstances made it impossible for them to utilize these workers in any
other way than as a source of rent payments; (c) the fact that the free-
dom of movement of workers between the potential employers competing
for their services could not easily be restricted; (d) the numerous oppor-
tunities of opening up new land, new mines, and new local markets;
(e) the primitive level of the technical tradition. The more the appro-
priation of profit opportunities by the workers replaced the ■appropriation
of workers by owners, the more the owners were dispossessed of their
rights of control and became mere recipients of rents and dues. Classical
examples are the mining industry and the English guilds. Even at this
early period the process tended to go further, to the point of redemption
or repudiation of the obligation to make payments to a lord altogether,
on the principle that "A townsman is a freeman." Almost immediately
all this led to a differentiation of the opportunities of making profit by
market transactions, arising either from within the group of workers
themselves or from without through the development of trade.

20. Social Aspects of the Division of Labor: The Appro-
priation of the Material Means of Production

The material means of production may be appropriated by workers
as individuals or as organizations, by owners, or by regulating groups
consisting of third parties.

When appropriated by workers, it may be by the individual worker
who then becomes the "owner" of the material means of production; or
the appropriation may be carried out by a completely or relatively closed
group of workers so that, though the individual worker is not the owner,
the organization is. Such an organization may carry out its functions as a
unitary economy on a "communist" basis, or with appropriation of shares
(genossenschaftlich^). In all these cases, appropriation may be used for
the purposes of budgetary administration or for profit making.

zo ] Appropriation of Material Means of Production i 3 1

Appropriation of the means of production by individual workers may
exist in a system of complete market freedom of the small peasants, arti-
sans, boatmen, or carters, or under the aegis of a regulating group.
Where it is not the individual but an organization which owns the means
of production, there is a wide variety of possibilities, varying particularly
with the extent to which the system is of a budgetary or a profit-
making character. The household economy, which is in principle not
necessarily by origin or in fact communistic (see Part Two, ch. HI), may
be oriented wholly to provision for its own needs. Or it may, perhaps
only occasionally, dispose of surpluses of certain types of raw material
accumulated by virtue of a favorable location, or of products derived
from some particular technical skill, as a means to better provision. This
occasional sale may then develop into a regular system of profit-making
exchange. In such cases it is common for "tribal" crafts to develop, with
interethnic functional specialization and trade between the tribes, since
the chances of finding a market often depend on maintaining a monop-
oly r which in turn is usually secured by inherited trade secrets. From
this may develop ambulatory crafts or possibly pariah 40 crafts or, where
these groups are united in a political structure and where there are ritual
barriers between the ethnic elements, castes, as in India.

The case where members of the group possess appropriated shares is
that of "producers' co-operation."* 1 Household economies may, with the
development of money accounting, approach this type. Otherwise, it is
occasionally found as an organization of workmen. It was of great signifi-
cance in one important case, that of the mining industry of the early
Middle Ages.

Since appropriation by organized groups of workers has already been
dealt with, appropriation by "owners" or organized groups of them can
only mean the expropriation of the workers from the means of produc-
tion, not merely as individuals, but as a whole. An owner may in this
connection appropriate one or more of the following items: land, includ-
ing water; subterranean wealth; sources of power, work premises; labor
equipment, such as tools, apparatus and machinery; and raw materials.
In any given case all these may be concentrated in a single ownership
or they may be appropriated by different owners. The owners may em-
ploy the means of production they appropriate in a context of budgetary
administration, either as means to provide for their own needs or as
sources of income by lending them out. In the latter case, the loans may
in turn be used by the borrower for budgetary purposes or as means for
earning a profit, either in a profit-making establishment without capital
accounting or as capital goods (in their own enterprise). Finally, the
owner may use them as capital goods in his own enterprise.

The appropriating agency may be an organization engaged in eco-
nomic activity. In this case, all the alternatives just outlined are open to
it.

I 3 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

It is, finally, also possible that the means of production should be
appropriated by an organization which only regulates economic activity,
which does not itself use them as capital goods or as a source of income,
but places them at the disposal of its members.

I. When land is appropriated by individual economic units, it is usu-
ally for the period of actual cultivation until the harvest or, so far as, by
virtue of clearing or irrigation, land is itself an artifact, for the period of
continuous cultivation- It is only when scarcity of land has become no-
ticeable that it is common for rights of cultivation, pasturage and use of
timber to be reserved to the members of a settlement group, and for the
extent of their use to be limited.

(i) When that happens, appropriation may be carried out by an or-
ganization. This may be of differing sizes, according to the mode of use,
to which the land is put — for gardens, meadows, arable land, pastures,
or woodland. These have been appropriated by progressively larger
groups, from the individual household to the whole tribe. Typical cases
are the appropriation of arable land, meadows, and pastures by a kin-
ship group or a neighborhood group, usually a village. Woodland has
usually been appropriated by broader territorial groups, differing greatly
in character and extent. The individual household has typically appro-
priated garden land and the area around the house and has had snares
in the arable fields and meadows. The system of shares may find ex-
. pressiofi CO in the de facto egalitarianism of the assignment of newly
tilled Gelds where cultivation is "ambulatory" (as in the so-called field-
grass husbandry), or (ii) in rationally systematic redistribution under
sedentary cultivation. The latter is usually the consequence of either
fiscal claims for which the village members are collectively held respons- *
ible, or of political claims of the members for equality. The unit of the
production organization has usually been the household (on which see
Part Two, ch. Ill and IV).

(2) Appropriation of the land may also be to a lord or seigneur
(Grwndfeerr). This seigneurial position, as will be discussed later, may
be based primarily on the individual's position of authority in a kinship
group or as tribal chieftain with claims to exact labor services (see Part
Two, ch. IV), or on fiscal or military authority, or on some form of or-
ganization for ; the systematic exploitation of new land or an irrigation
project. Seigneurial domination over land (.Grundherrxhaft) may be
. made a . source of utilities by the employment of the unfree labor of
slaves or serfs* This, in turn, may be administered as part of a budgetary
unit, through deliveries in kind or labor services, or as a means of profit,
as a "plantation." On the other hand, it may be exploited with free
labor. Here again it may be treated in budgetary terms, drawing income
from the land in the form of payments in kind or from share-cropping
by tenants or of money rents from tenants. In both cases the equipment
used may be provided by the tenant himself, or by the seigneur (colo-

20 ] _ Appropriation of Material Means of Production i 3 3

nate). A lord may also exploit his holding as a source of profit in the
form of a large-scale rational economic enterprise.

Where the land is used as part of a budgetary economy with unfree
,. labor, the lord is apt to be bound traditionally in his exploitation of it,
.both with respect to his labor personnel, which is not subject to selec-
fcn, and to their functions. The use of unfree labor in .a profit-making
establishment, the "plantation," occurred only in a few cases, notably
in Antiquity in Carthage and in Rome, and in modern times in the
plantations of colonial areas and in the Southern States of North Amer-
ica. The use of land in large-scale profit-making enterprises with free
labor has occurred only in the modem Western \Vorld. It is the mode
of development of the medieval landlordship or seigneurie (Grundherr-
schaft),. in particular the way in which it was broken up, which has
been most decisive in determining the modern forms of land appropria-
tion. The modern pure type knows only the .following categories: the
owner of the land, the capitalistic tenant, and the propertyless agricul-
tural laborer. But this pure type is exceptional, found principally in
England.

II. Sources of wealth adapted to exploitation by -mining may be
4 appropriated in the following ways: (a) By the owner of the land, who
in the past has usually been a seigneur; (b) by a political overlord
(owner of the regal prerogatives or "royalties"); (c) by any person dis-
covering deposits worthy of mining (Bergbaufretheity, (d) by an organ-
ization of workers; and (e) by a profit-making enterprise. Seigneurs and
owners of "royalties" may administer their holdings themselves, as they
did occasionally in the early Middle Ages; or they may use them as a
source of income, by leasing them to an organized group of workers or
to any discoverer whatever or to anyone who was a member of a given
group. This was the case with the "freed mountains" (gefreite Berge)
of the Middle Ages and was the origin of the institution ' of "mining
freedom" (Bergbaufreikeit).**

In the Middle Ages, the groups of organized mine workers were
typically closed membership groups with shares held by the members,
where each member was under obligation, either to the seigneurial
owner, or to the other members collectively responsible to him, to work
' in the mine. This obligation was balanced by a right to a share in the
products. There was also a type of a pure "owners" association, each
sharing in the proceeds or the contributions required due to losses. TTie
tendency was for the seigneurial owners to be progressively expropriated
in favor of the workers; but these, in him, as their need for investment
in installations increased, became more and more dependent on groups
with command over capital goods. Thus in the end, the appropriation
took the form of a capitalistic Gewerkschaft, a limited liability company.

HI. Means of production which are fixed installations, such as
sources of power, particularly water power, "mills" for various different
purposes, and workshops, sometimes including the fixed apparatus in
them, have in die past, particularly in the Middle Ages, generally been

I 3 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

appropriated in one of the following ways: (a) by princes or seigneurs;
(b) by towns (either as economically active or merely regulating organ*
izations); (c) by associations of workers, such as guilds (as "regulating"
groups), without the development, in any of them, of a unified produc-
tion organization (Betrjefe).

In the first two cases, they were usually exploited as a source of
income, a charge being made for their use. This has often been com-
bined with interdiction of rival facilities and the compulsory use of those
belonging to the lord- Each production unit would make use of the facil-
ities in turn, according to need or, under certain circumstances, it was
made the monopoly of a closed regulative group. Baking ovens, various
kinds of grinding mills for grain or oil, fulling mills, polishing installa-
tions, slaughter-houses, dye-works, bleaching installations, forges — which
were usually, to be sure, leased — , breweries, distilleries, other installa-
tions including particularly shipyards in the possession of the Hanseatic
towns, and all kinds of market sfe'ls have been appropriated in this
precapitalistic way, to be exploited by allowing workers to use them in
return for a payment; they were thus used as part of the Budgetary
wealth (Verindgen), rather than as capital of the owners (individuals
or organizations, including town corporations). This type of production
and budgetary exploitation of fixed installations as a source of invest-
ment income for the owning individual or group, or possibly production
by a producers' co-operatiye group, has preceded the creation of "fixed
capital" of individual business units. Those using such installations have
tended to treat them in part as means of meeting their own household
needs, especially in the case of baking ovens and of brewing and dis-
tilling installations, and in part for profit-making operations.

IV. For maritime transport the typical arrangement in the past has
been the appropriation of the ship by a plurality of owners, who tended ,
to become more and more sharply differentiated from the actual sea-
farers. The fa^t that the organization of maritime enterprise then tended
to develop into a system of risk-sharing with shippers, in which ship
owners, officers, and even the crew, were associated as shippers of
freight, did not, however, produce any fundamentally new forms of
appropriation. It affected only the forms of setding accounts and hence

- the distribution of profit-making possibilities.

j- V. Today, it is usual for the installations of all kinds and the tools
to be appropriated under one controlling agency, as is essential to the
modem factory; but in earlier times, this has been exceptional. In partic-
ular, the economic character of the Greek and Byzantine ergasterion and
the corresponding Roman ergastulwn has been highly ambiguous, a fact
which historians have persistently ignored^ It was a "workshop" which
might, (i) be a part of a budgetary unit in which slaves would carry
out production for the owner's own needs, as for the needs of a landed
estate, or subsidiary production of goods for sale. But 00 the workshop
might also be used as a source of rent revenue, part of the holdings of a
private individual or of an organization, which latter might be a town,

20 ] Apfropriation of Material Means of Production 135

as was true of the ergasteria of the Piraeus. Such ergasteria would then
be leased to individuals or to organized closed groups of workers. Thus,
when it is stated that an ergasterion was exploited, especially a municipal
one, it is always necessary to inquire further to whom it belonged
and who was the owner of the other means of production necessary for
the work process. Did free labor work there? Did they work for their
own profit? Or did slaves work there, in which case it is necessary to know
who their owners were, and whether they were working on their own
account, making faofapd payments to their master, or directly for their
master. According to the ways in which these questions are answered,
the structure would be radically different from an economic point of
view. In the great majority of cases, as late as the Byzantine and Mo-
hammedan types, the ergasterion seems to have been primarily a source
of rent revenue, and was hence fundamentally different from the modem
factory or even its early predecessors. From an economic point of view,
this category is/in its economic ambiguity, most closely comparable to
the various types of mills found in the Middle Ages.

VI. Even in cases where the workshop and the means of production
are appropriated by an individual owner who hires labor, the situation is
t not, from an economic point of view, necessarily what would usually
be called a "factory" today. For this it would be necessary in addition to
have the use of mechanical power, of machinery, and of an elaborate
internal differentiation and combination of functions. The factory today
is a category of the capitalistic economy. Hence in the present discussion
the concept "factory" will be confined to a type of establishment which
is at least potentially under the control of a profit-making firm with
fixed capital, which thus takes the form of an organized workshop with
internal differentiation of function, with the appropriation of all non-
human means of production and with a high degree of mechanization of
the work process by the use of mechanical power and machinery. The
great workshop of "Jack of Newbury"** of the early sixteenth century,
which was sung about by balladeers of a later day, did not have any of
these features. It is alleged to have contained hundreds. of hand looms,
which were his property and for the workers of which he bought the
raw materials, and also all manner of "welfare" arrangements. But each
, worker worked independently as if he were at home. Internal differenti-
ation and combination of functions could, to be sure, exist in an Egyp-
tian, Greek, Byzantine or Mohammedan ergasterion which a master
worked with his unfree laborers. But the Greek texts show clearly that
even in such cases is was common for the master to be content with the
payment of an &wo<jiopd from each worker and perhaps a higher one
from the foreman. This alone is sufficient to warn us not to consider
such a structure economically equivalent to a factory or even to a work-
shop like that of "Jack of Newbury." The closest approximation to the
factory in the usual sense is found in royal manufactories, like the impe-
rial Chinese porcelain manufactory and the European manufactories of
court luxuries, which were modelled on it, and especially those for the

I $6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Cfc. 11

production of military equipment. No one can be blamed for calling
these "factories." And the Russian workshops operating with serf labor
seem at first sight to stand even closer to the modern factory. Here the
appropriation of the workers themselves is added to that of the means of
production. Neverthe&ss, for present purposes the concept "factory" will,
for the reasons stated, be limited to organized workshops where the ma-
terial means of production are fully appropriated by an owner, but the
workers are not; where there is internal specialization of functions, and
where mechanical power and machines which must be "tended" are.
used. All other types of organized workshops will he designated by that
word, with the appropriate adjectives. " '~

z i .* Social Aspects of the Divisiotfof Labor: The Appro-
priation of Managerial Functions

(0 In all cases of the management of traditional budgetary (house-
hold) units, it is typical for the appropriation of managerial functions
to take place either by the titular head himself, such as the head of the
family or the kinship group, or by members of an administrative staff
appointed for the management of the unit, as in the case of service fiefs
of household officials.

(2) In the case of profit-making enterprises, it occurs in the follow-
ing situations: (a) When management and ordinary labor are entirely
or very nearly identical. In this case there is usually also appropriation
of the material means of production by the worker. This type of ap-
propriation may be unlimited, that is, hereditary and alienable on the
part of the individual, with or without a guaranteed market. It may, on
the other hand, be appropriation to an organized group, with appropria-
tion of the function by the individual restricted to personal tenure* 4 or
subject to substantive regulation, thus limited and dependent on various
conditions. Again, a market may or may not be guaranteed, (b) Where
management and ordinary work are separated, there may be a monopo-
listic appropriation of entrepreneurial functions in various possible forms,
notably to closed membership groups, such as guilds, or to monopolies
granted by the political authority.

(3) In cases where managerial functions are, from a formal point of
view, wholly unappropriated, the appropriation of the means of produc-
tion or of the credit necessary for securing control over them is in prac-
tice, in a capitalistic form of organization, identical with appropriation of
control of management by the owners of the means of production.
Owners can, in such cases, exercise their control by personally managing
the business or by appointment of the actual managers. Where there is

2i ] - Appropriation of Managerial Functions 137

a plurality of owners, they will co-operate in the selection. These points
are so obvious that there is no need of comment.

Wherever there is appropriation of technically complementary means
of production, it generally means, in practice, at least some degree of
effective voice in the selection of management and, to a relative extent
at least, the expropriation of the workers from management. The ex-
propriation of the individual workers, however, does not necessarily
imply the expropriation of workers in general. Though they are formally
expropriated, it is possible for an association of workers to be in fact in a
position to exact for itself an effective share in management or in the
selection of managing personnel.

22. The Expropriation of Workers from the Means of
Production

The expropriation of the individual worker from ownership of the
means of production is determined by purely technical factors in the
following cases: (a) if the means of production require the services of
many workers, at the same time or successively; (b) if sources of power
can be rationally exploited only by using them simultaneously for many
similar types of work under a unified control; (c) if a technically rational
organization of the work process is possible only by combining many
complementary processes under continuous comrr.jn supervision; (d) if
special technical training is needed for the management of co-ordinated
processes of labor which, in turn, can only be exploited rationally on a
large scale; (e) if unified control over the means of production and raw
materials creates the possibility of subjecting labor to a stringent disci-
pline and hence of controlling the speed of work and of attaining
.standardization of effort and of product quality.

These factors, however, do not exclude the possibility of appropria-.
tion by an organized group of workers, a producers' co-operative. They
necessitate only the separation of the individual worker from the means
of production.

The expropriation of workers in general, including clerical personnel
and technically trained persons, from possession of the means of produc-
tion has its economic reasons above all in the following factors : (a) The
fact that, other things being equal, it is generally possible to achieve a
higher level of economic rationality if the management has extensive
control over the selection and the modes of use of workers, as compared
with the situation created by the appropriation of jobs or die existence of

I 3 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11

rights to participate in management. These latter conditions produce
technically irrational obstacles as well as economic irrationalities. In
particular, considerations appropriate to small-scale budgetary administra-
tion and the interests of workers in the maintenance of jobs ("livings")
are often in conflict with the rationality of the organization, (b) In a
market economy a management which is not hampered by any estab-
lished rights of the workers, and which enjoys unrestricted control over
the goods and equipment which underlie its borrowings, is of superior
credit-worthiness. This is particularly true if the management consists of
individuals experienced in business affairs and with a good reputation
for "safety" derived from their continuous conduct of business. 00 From
a historical point of view, the expropriation of labor has arisen since the
sixteenth century in an economy characterized by the progressive ex-
tensive and intensive expansion of the market system on the one hand,
because of the sheer superiority and actual indispensability of a type of
management oriented to the particular market situations, and on the
other because of the structure of power relationships in the society.

In addition to these general conditions, the effect of the fact that
enterprise has been oriented to the exploitation of market advantages has
in the following ways favored such expropriation: (a) because it put a
premium on capital accounting — which can be effected in the tech-
nically most rational manner only with full appropriation of capital
goods to the owner — as against any type of economic behavior with less
rational accounting procedures; (b) because it put a premium on the
purely commercial qualities of the management, as opposed to the tech-
nical ones, and on the maintenance of technical and commercial secrets;
(c) because it favored a speculative business policy, which again requires
expropriation. Further, and in the last analysis quite regardless of the
degree of technical rationality, this expropriation is made possible, (d)
by the sheer bargaining superiority which in the labor market any kind
of property ownership grants vis-a-vis the workers, and which in the
commodity markets accrues to any business organization working with
capital accounting, owned capital equipment and borrowed funds vis-a-
vis any type of competitor operating on a lower level of rationality in
methods of calculation or less well situated with respect to capital and
credit resources. The fact that the maximum of formal rationality in
capital accounting is possible only whe*re the workers are subjected to
domination by entrepreneurs, is a further specific element of substantive
irrationality in the modern economic order. Finally, (e), a further
economic reason for this expropriation is that free labor and the com-
plete appropriation of the means of production create the most favorable
conditions for discipline.

23 ] Expropriation of Workers from Means of Production 139

23. The Expropriation of Workers from the Means of
Production — (Continued)

The expropriation of all the workers from the means of production
may in practice take the following forms: (1) Management is in the
hands of the administrative staff of an organization. This would be true
very particularly also of any rationally organized socialist economy,
which would retain the expropriation of all workers and merely bring
it to completion by the expropriation of the private owners. (2) Man-
agerial functions are, by virtue of their appropriation of the means of
production, exercised by the owners or by persons they appoint. The
appropriation of control over the persons exercising managerial authority
by the interests of ownership may have the following forms: (a) Man-
agement by one or more entrepreneurs who are at the same time owners
— the immediate appropriation of entrepreneurial functions. This situa-
tion, however, does not exclude the possibility that a wide degree of
control over the policies of management may rest in hands outside the
'enterprise, by virtue of their powers over credit or financing — for in-
stance, the bankers or financiers who finance^ the enterprise; (d) separa-
tion of managerial functions from appropriated ownership, especially
through limitations of the functions of owners to the appointment of
management and through shared free (that is, alienable) appropriation
of the enterprise as expressed by shares of the nominal capital (stocks,
mining shares). This state, which is related to the purely personal form
of appropriation through various types of intermediate forms, is rational
in the formal sense in that it permits, in contrast to the case of permanent
and hereditary appropriation of the management itself of accidentally
inherited properties, the selection for managerial posts of the persons best
qualified from the point of view of profitability. But in practice it may
mean a number of things, such as: That control over the managerial
position may come, through appropriation, into the hands of "outside
interests" representing the resources of a budgetary unit, or mere wealth
(Venndgen; see above, ch. II, sec. 10), and seeking above all a high rate
of income; or that control over the managerial position comes, through
temporary stock acquisitions, into the hands of speculative "outside in-
terests" seeking gains only through the resale of their shares; or that
disposition over the managerial position comes into the hands of outside
business interests, by virtue of power over markets or over credit, such
as hanks or "financiers," which may pursue their own business interests,
often foreign to those of the organization as such.

We call "outside interests" those which are not primarily oriented to
the long-run profitability of the enterprise. This may be true of any kind

140 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

of budgetary "wealth" interests. It is particularly true, however, of inter-
ests' which consider their control over the plant and capital goods of the
enterprise or of a share in it not as a permanent investment, but as a
means of making a purely short-ran speculative profit. The types of out-
side interest which are most readily reconciled with those of the enter-
prise — that is, its interests in present and long-run profitability — are
those seeking only income (rentiers).

The fact that such "outside" interests can affect the mode of control
over managerial positions, even and especially when the highest degree
of formal rationality in their selection is attained, constitutes a further
element of substantive irrationality specific to the modem economic
order. These might be entirely private "wealth" interests, or business
interests which are oriented to ends having no connection whatsoever
with the organization, or finally, pure gambling interest. By gaining
control of shares, all of these can control the appointment of the man-
aging personnel and, more important, the business policies imposed on
this management. The influence exercised by speculative interests out-
side the producing organizations themselves on the market situation,
especially that for capital goods, and thus on the orientation of the produc-
tion of goods, is one of the sources of the phenomena known as the
"crises" of the modern market economy. This cannot, however, be fur-
ther discussed here.

24. The Concept of Occupation and Types of
Occupational Structure

The term "occupation" (Berwf) will be applied to the mode of
specialization, specification, and combination of the functions of an
individual so far as it constitutes for him the basis of a continuous
opportunity for income or earnings. The distribution of occupations
may be achieved in the following ways: (1) by means of a heteronomous
assignment of functions and of provisions for maintenance within an
organization regulating economic activity — unfree differentiation of
occupations — or through autonomous orientation to the state of the
market for occupational services — free differentiation of occupations;

(2) it may rest on the specification or the specialization of functions;

(3) it may involve economic exploitation of the services by their bearers
on either an autocephalous or a heterocephalous basis.

The structure of occupational differentiation and that of opportuni-
ties for business income are closely related. This will be discussed in
relation to die problems of "class" and "status" stratification.

24 ] "Occupation" & Types of Occupational Structure i 4 1

On occupation as a basis of status, and on classes in general, see
chap. IV, below."

1. Unfree organization of occupations exists in cases where there is
compulsory assignment of functions within the organization of a royal
estate, a state, a feudal manor, or a commune on the basis of liturgies or
of the oikos type of structure. The free type of distribution arises from
the successful offer of occupational services on the labor market or suc-
cessful application for free "positions."

z. As was pointed out above in sec. 16, specification of functions
was typical of the handicrafts in the Middle Ages; specialization is
characteristic of the modem rational business organization. The distri-
bution of occupations in a market economy consists to a large extent of
technically irrational specification of functions, rather than of rational
specialization of functions, because such an economy is oriented to- the
market situation and hence to the interests of purchasers and consum-
ers. This orientation determines [the uses to which] the entire bundle
of labor services offered by a given productive unit will be put in a
manner often different from the specialization of functions [of the given
labor force], thus making necessary modes ot combination of functions
which are technically irrational.

4 3. Cases of autocephalous occupational specialization are the inde-
pendent "business" of an artisan, a physician, a lawyer, or an artist. The
factory worker and the government official, on the other hand, occupy
heterocephalous occupational positions.

The occupational structure of a given social group may vary in the
following ways: (a) According to the degree in which well-marked and
stable occupations have developed at all. The following circumstances
are particularly important in this connection: the development of con-
sumption standards, the development of techniques of production, and
the development of large-scale budgetary units in the case of unfree oc-
cupational organization, or of market systems in that of free organization;
(b) according to the mode and degree of occupational specification of
specialization of individual economic units. This will be decisively in-
fluenced by the market situation for the services or products of special-
ized units, which is in turn dependent on adequate purchasing power.
It will also be influenced by the mode of distribution of control over
' capital goods; (c) according to the extent and kind of continuity or
change in occupational status. This in turn depends above all on two
factors: on the one hand, on the amount of training required for the
specialized functions, and on the other hand the degree of stability or
instability of opportunities for earnings from them. Tne latter is in tu*n
dependent on the type and stability of distribution of income and on the
state of technology.

Finally, it is always important in studying occupational structure to
know the status stratification, with the attendant status-tied types of ed-
ucation and other advantages and opportunities which it creates for cer-
tain kinds of skilled occupations. '■■''■

It ts only functions which require a certain minimum of training and

I 4 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

for which opportunity of continuous remuneration is available which
become the objects of independent and stable occupations. The choice
of occupation may rest on tradition, in which case it is usually hered-
itary; on goal-oriented rational considerations, especially the possibility
of returns; on charismatic or on affectual grounds; and finally, in partic-
ular, on grounds of prestige with particular reference to status. Origi-
nally, the more directly individual "callings" have been dependent
primarily on charismatic (magical) elements, while all the rest of the
occupational structure, so far as in a differentiated form it existed at all,
was traditionally fixed. The requisite charismatic qualities, so Ear as they
were not specifically personal, tended to become the object of a tradi-
tional "training" in closed groups, or of hereditary transmission. Individ-
ual occupations which were "not of a strictly charismatic character first
appeared on a liturgical basis in the large-scale households of princes
and landed lords, and then in the market economy of the towns. Along-
side of this, however, a large role in their development was always
played by the literary forms of education with a nigh status esteem,
which arose in close connection with magical, ritual, or priestly ("cleri-
cal") professional training.

From what has been said it will be seen that occupational specializa-
tion does not necessarily imply continuous rendering of services, either
on a liturgical basis for an organization — in a royal household or a
workshop — or for a completely free market. Other forms are not
only possible but common: (1) Propertyless occupationally specialized
workers may be employed on an occasional basis as needed in the
service of a relatively stable group of either consumers in household
units or employers in profit-making enterprises. In the case of work for
households, we have the possibility of the expropriation from the worker
of at least the raw materials (and hence of the control over the final
product); services may be rendered on this basis either on the consumer's
premises (Stor), whether it be by itinerant workers or by sedentary
workers moving around the households of a local clientele, or on the
workers' premises: shop or household ("wage work" [in Bucher's termi-
nology] 46 ). In either case the consumer household provides the raw
materials, but it is customary for the worker to own his took — the mower
his scythe, the seamstress her sewing equipment, etc. The cases of Stdr
involve temporary membership in the consumer's household.

The case, contrasting with the above, in which the worker owns all
means of production, Biicher terms "price work."

Occupationally specialized workers may be employed on an oc-
casional basis by profit-making enterprises when at least the raw material,
and thus also control over the product, belongs to the employer. In this
case there may be migratory labor for a variety of different employers in
different units, or occasional or seasonal work for an employer, the work

2,4 ] "Occupation" & Types of Occupational Structure i 4 3

being done in the worker's own household. Migratory harvest labor is
an example of the first type. The second type may be illustrated by any
type of occasional work at home which supplements the work in the
workshop.

Occupational specialization without continuous engagement of the
types noted above can also exist if: (2) Economic activity is conducted
with appropriated means of production and CO there is capital account-
ing and partial appropriation — especially, appropriation restricted to the
fixed installations — by owners. Examples are workshops and factories
transforming raw materials owned by others (Lohnfabriken') and, above
all, factories producing under contract for an outside entrepreneur who
takes charge of sales and other entrepreneurial functions (yerlegte
Fabriken); the former have existed for a long time, while the latter have
recendy become common. Or, if (ii) there is complete appropriation of
the means of production by the workers, with the following possibilities:
(a) in small-scale units without capital accounting, either producing for
households ("price work" for customers), or producing for commercial
enterprises. The latter is a case of domestic industry without expropria-
tion of the means of production. The worker is formally a free craftsman,
but is actually bound to a monopolistic group of merchants who are
buyers for his product; (b) on a large scale with capital accounting and
production for a fixed group of purchasers. This is usually, though not
always, the result of market regulation by cartels.

Finally, it must be pointed out that not every case of acquisitive
action is necessarily part of an occupational profit-making activity; nor
is it necessary that involvement in acquisitive action, however frequent,
should imply a continuous specialization with 2 constant meaningful
orientation. With respect to the first observation, we note that "occasional
acquisition" is found as a result of the disposal of surpluses produced
in a budgetary unit. Corresponding to these is occasional trading of goods
by large-scale budgetary units, especially seigneurial estates. From this
starting point, it is possible to develop a continuous series of possible
"occasional acquisitive acts," such as the occasional speculation of a
rentier, occasional publication of an article or a poem by a person who is
not a professional author, and similar modem phenomena, to the case
where such things constitute a "subsidiary occupaiton" ( Nebenberuf ).

As to the second observation, it should be remembered that there are
ways of making a living which are continually shifting and funda-
mentally unstable. A person may shift continually from one type of
"occasional" profitable activity to another; or even between normal
legitimate earning and begging, stealing, or highway robbery.

The Following must be treated in special terms: (a) Support from

14 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11

purely charitable sources; (b) maintenance in an institution on other
than a charitable basis, notably a penal institution; (c) regulated acquisi-
tion by force; and (d) criminal acquisition; that is, acquisition by force
or Fraud in violation of the rules of an order. The cases of (b) and (d)
are of relatively litde interest; (a) has often been of tremendous impor-
tance for hierocratic groups, such as mendicant orders; while (c) has
been crucial for many political groups in the form of the booty gained
from war, and in both cases the economy was profoundly affected. It is
characteristic of both these cases that they lie outside the realm of
economic activity as such. Hence this is not the place to enter into a
more detailed classification. The forms will be treated elsewhere. For
reasons which are in part the same, the earnings of civil servants, in-
cluding military officers, have been mentioned below (sec. 38) only in
order to give them a place as a sub-type of the earnings of labor, but
without going into the details. To do this, it would be necessary to dis-
cuss the structure of relations of domination in the context of which
these types of earnings are to be placed.

2,4a. The Principal Forms of Appropriation and of
Market Relationship

According to the theoretical schemes which have been developed
starting with sec. 15, the classification of the modes of appropriation in
their technical, organizational aspects, and of the market relationships/is
exceedingly complex. But actually, only a few of the many theoretical
possibilities play a really dominant role.

( l ) With respect to agricultural land : (a) There is the "ambulatory"
cultivation by household units, which changes its location whenever the
land has been exhausted. The land is usually appropriated by the tribe
while its use is temporarily or permanently appropriated by neighbor-
hood groups, with only temporary appropriation of the use of land to
individual households.

The extent of the household group may vary from the individual
conjugal family, through various types of extended family groups, to
organized kin groups or a widely extended household community.
(Agriculture is "ambulatory" as a rule only in relation to arable land,
much less commonly and at longer intervals for farmyard sites.)

(b) Sedentary agriculture. The use of arable fields, meadows, pas-
tures, woodland, and water is usually regulated by territorial or village
associations for the smaller family household. Gardens and the land

2^a ] Forms of Appropriation and of Market Relationship 1 4 5

immediately-surrounding the buildings are normally appropriated by the
immediate family; arable fields, usually meadows, and pastures, by the
village organization; woodland, by more extensive territorial groups.
Redistribution of land is usually possible according to the law, but has
generally not been systematically carried through and is hence usually
obsolete. Economic activities have generally been regulated by a system of
rules applying to the whole village. This is a "primary village economy."

It is only in exceptional cases, such as China, that the extended kin-
ship group has constituted an economic unit. Where this is the case, it
has generally taken the form of a rationalized organization, such as a
clan association.

(c) Seigneurial rights over land (Grundherrschaft) and persons
(Leibherrsckaft~) with a central manor of the lord (Jrronhof*) and de-
pendent peasant farms obligated to deliveries in kind and labor services.
The land itself and the workers are appropriated by the lord, the use
of the land and rights to work by the peasants. This is a simple case of
manorial organization based on income in kind.

t (d) Seigneurial or fiscal monopoly of control over the land, with col-
lective responsibility of the peasant community for meeting fiscal obliga-
tions. This leads to communal control over and regular systematic
redistribution of the land. The land is, as a correlate of the fiscal burden,
by decree permanently appropriated to the organized peasant community,
not to the individual household; the latter enjoys only rights of use and
these are subject to redistribution. Economic activity is regulated by the
rules imposed by the manorial or the political lord! This is manorial or
fiscal field community (_Feldgemeinsckaft).

(e) Unrestricted seigneurial land proprietorship with exploitation of
the dependent peasants as a source of rent income. The land is appropri-
ated by the lord; but cohni* 7 sharecroppers, or tenants paying money
rent carry out the actual economic activities.

(f) The plantation. The land is freely appropriated and worked by
purchased slaves. The owner uses both as means of profit-making in a
capitalistic enterprise with unfree labor.

(g) The "estate. economy" (GutswirtschafO. The land is appropri-
ated to owners who either draw rent from it by leasing it to large-scale
tenant farmers or farm it themselves for profit. In either case free labor
is used, living in their own homesteads "or those supplied by the landlord,
and — in both cases again — conducting some agricultural production or,
in the marginal case, none at all on own account.

(h) Absence of seigneurial ownership (Grundherrschaft): a peasant
economy with appropriation of the land by the farmer (peasant). In
practice this form of appropriation may mean that the land farmed is

I 4 & SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Ch. 11

predominantly inherited land, or, on the other hand, that land lots are
freely bought and sold. The former is typical of settlements with scattered
farms and large-scale peasant proprietors; the latter, where setdement is
in villages and the scale is small.**

Where tenants pay a money rent and where peasant proprietors buy
and sell land, it is necessary to presuppose an adequate local market for
the products of peasant agriculture.

(2) In the field of industry and transport, including mining, and of
trade:

(a) Household industry carried on primarily as a means of occasional
exchange of surpluses, only secondarily as a means of profit. This may
involve an inter-ethnic division of labor, out of which in turn caste oc-
cupations have occasionally developed. In both cases appropriation of the
sources of raw materials, and hence of the raw material production, is
normal; purchase of raw materials and transformation of non-owned raw
material ("wage work") are secondary phenomena. In the case of inter-
ethnic specialization, formal appropriation is often absent. TheTe is, how-
ever, generally, and in the case of caste, always, hereditary appropriation
of the opportunities for earnings from specified functions by kinship or
household groups.

• (b) "Tied" craft production directly for customers: specification of
functions in the service of an organized group of consumers. This may be
a dominating group (oikos or seigneurial specification), or it may be a
closed membership group (demiurgic specification).

There is no market sale. In the first case, we find organization of
functions on a budgetary basis, or of labor in a workshop, as in the
ergasterion of the lord. In the second case, there is hereditary appropria-
tion of the status of the workers which may, however, become alienable,
and work is carried out for an appropriated group of customers (con-
sumers). There are the following very limited possibilities of develop-
ment: (i) Appropriated (formally unfree) workers who are carriers of
specified functions — of a trade — may be used either as a source of income
payments to their owner, in which case they are usually and in spite
of their forma! servility substantively free, working in most cases directly
for their own customers (rent slaves); or again, they might be used as
unfree domestic craft producers, producing for the owner's profit; or,
finally, as workers in the owner's workshop or ergasterion, also producing
for profit, (ii) This may also develop into a liturgical specification of
functions for fiscal purposes, similar to the type of caste occupations.

In the field of mining, there are similar forms, notably the use of
unfree labor, slaves or serfs, in productive units controlled by princes or
seigneurial owners.

24« ] Forms of Appropriation and of Market Relationship i 4 7

In inland transportation, it is common for transportation installations
[roads] to be appropriated by a seigneurial owner as a source of rent
revenue. Maintenance services are then compulsorily imposed on spec-
ified small peasant holdings. Another possibility is small-scale caravan
trade regulated by closed membership groups. The traders would then
appropriate the goods themselves.

In the field of maritime transportation: (i) The ownership of ships
by an oikos, a seigneur or a patrician trading on own account; (ii)
co-operative construction and ownership of ships, captain and crew par-
ticipating in trade on their own account, small travelling merchants con-
stituting the shippers, all parties sharing the risks, and voyages made in
strictly regulated "caravans." In all these cases "trade" was still identical
with inter-local trade, that is, with transport.

(c) Free non-agricultural trades. Free production for consumers in
return for a wage, either on the customer's premises or on that of the
worker. Usually the raw materials were appropriated by the customer,
the tools by the worker, premises and installations, if any were involved,
by a lord as a source of income or by organized groups with rights of use
in rotation. Another possibility is that both raw materials and tools should
be appropriated by the worker who thus managed his own work, whereas
premises and stationary equipment belonged to an organized group of
workers, such as a guild. In all these cases, it is usual for the regulation
of profit-making activity to be carried on by guilds.

In mining, deposits have usually been appropriated by political
authorities or by seigneurial owners as sources of rent, while the rights
of exploitation have been appropriated by organized groups of workers.
Mining operations have been regulated on a guild basis with participation
in the work an obligation of the members to the lord, who was interested
in the rent, and to-the working group (BfirggenwincJe), which was collec-
tively responsible to him and had an interest in the proceeds.

In the field of inland transport, we find boatmen and teamster guilds
' with fixed rotation of travel assignments among the members and regu-
lation of their opportunities for profit.

In the field of maritime transport, shared ownership of ships, travel-
ling in convoys, and travelling merchants acting as commenda partners
for businessmen staying at home are typical everywhere.

There are the following stages in the development toward capitalism:

(a) Effective monopolization of money capital by entrepreneurs, used
as a means to make advances to labor. Connected with this is the assump-
tion of powers of management over the process of production by virtue
of the.extension of credit, and of control over the product in spite of the
fact that appropriation of the means of production has continued for-

148 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

mally in the hands of the workers, as in the handicrafts and in mining;
(b) appropriation of the right of marketing products on the basis of
previous monopolization both of knowledge of the market and hence" of
market opportunities and of money capital. This was made possible by
the imposition of a monopolistic system of guild regulation or by privi-
leges granted by the political authority in return for periodical payments
or for loans; (c) the subjective disciplining of workers who stood in a
dependent relationship in the putting-out system, via the supply of raw
materials and apparatus by the entrepreneur. A special case is that of the
rational monopolistic organization of domestic industries on the basis
of privileges granted in the interests of public finances or of the employ- ,
ment of the population. The conditions of work were thereby regulated by
imposition from above as part of the concession which made profit-making
activity possible, (d) the development of workshops without a rational
specialization of labor in the process of production, by means of the ap-
propriation by the entrepreneur of all the material means of production.
In mining this included the appropriation by individual owners of
mineral deposits, galleries, and equipment. In transportation, shipping
enterprises fell into the hands of large owners. The universal result was
the expropriation of the workers from the means of production; (e) the
final step in the transition to capitalistic organization of production was
the mechanization of the productive process and of transportation, and
its orientation to capital accounting. All material means of production
become fixed or working capital; all workers become "hands." As a result
of the transformation of enterprises into associations of stock holders^
the manager himself becomes expropriated and assumes the formal status
of an "official." Even the owner becomes effectively a trustee of the sup-
pliers of credit, the banks.

Of all these various types, the following instances may be noted :
1. In agriculture, type (a), migratory agriculture, is universal. But
the sub-type where the effective unit has been the large-scale household
or kinship group, is found only occasionally in Europe, quite frequently
in East Asia, particularly China. Type (b), sedentary agriculture with
land-use-regulating village associations, has been common in Europe and
India. Type (c), seigneurial rights over the land with restrictions due to
mutual obligations, has been found everywhere and is still common in
some parts of the Orient. Type (d), seigneurial or fiscal rights over the
land with systematic redistribution of the fields by the peasants, has
existed in the more seigneurial type in Russia and in a variant involving
the redistribution of land rents in India,** and in the more fiscal form in
East Asia, the Near East, and Egypt. Type (e), unrestricted seigneurial
land ownership drawing rent from small tenants, is typical of Ireland,

24a ] Forms of Appropriation and of Market Relationship i 4 9

but also occurs in Italy, southern France, China, and the eastern parts
of the Hellenistic world in Antiquity. Type (f), the plantation with un-
free labor, was characteristic of Carthage and Rome in Antiquity, of
modern colonial areas, and of the Southern States of the United States.
Type (g), the "estate economy" in the form which involves separation
of ownership and exploitation, has been typical of England; in the form
of owner management, of eastern Germany, parts of Austria, Poland,
and western Russia. Finally, type (h), peasant proprietorship, has been
found in France, southern and western Germany, parts of Italy, Scandi-
navia, with certain limitations in south-western Russia, and with modi-
fications particularly in modern China and India.

These wide variations in the forms which the organization of agricul-
ture has finally assumed are only partially explicable in economic terms,
that is, from such factors as the difference between the cultivation of
forest clearings and of areas requiring irrigation. Special historical cir-
cumstances played a large role, and especially the forms taken by political
and fiscal obligations and military organization.
v 2. In the field of industry, the following outline of the distribution
of types may be given. Our knowledge of the situation in transportation
and mining is not sufficiently complete to give such an oudine for those
fields.

(a) The first type, tribal crafts, has been found universally; (b) or-
ganization on the basis of occupational castes became general only in
India. Elsewhere it has existed only for occupations considered dis-
creditable and sometimes ritually impure; (c) the organization of in-
dustry on the basis of the oikos is found in all royal households in early
times, but has been most highly developed in Egypt. It has also existed
on seigneurial manors all over the world. Production by demiurgic crafts
was occasionally found everywhere, including the Western World, but
has developed into a pure type only in India. The special case of the use
of control over unfree persons simply as a source of rent was common
•in Mediterranean Antiquity. The liturgical specification of functions was
characteristic of Egypt, of the Hellenistic period, of the later Roman
Empire, and has been found at times in China and India; (d) the free
handicraft organization with guild regulations is classically illustrated
in the European Middle Ages and became the predominant form only
there. It has, however, been found all over the world; and guilds, in
particular, have developed very widely, especially in China and the Near
East. It is notable, however, that this type was entirely absent from the
economic organization of the period of Mediterranean "classical" An-
tiquity. In India, the caste took the place of the guild. Of the stages in
the development toward capitalism, only the second was reached on a

I 5 o SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. II

large scale outside the Western World. This difference cannot be ex-
plained entirely in purely economic terms.

25. Conditions Underlying the Cahuhhility of the

Productivity of Labor

1. In the three typical communist forms of organization, non-
economic motives play a predominant part (see below, sec. 26). But
apart from these cases, there are three primary conditions affecting the
optimization of calculable performance by labor engaged in carrying out
specifications: ,(a) The optimurn 'of aptitude for the function; (b) the
optimum of skill acquired through' practice; CO die optimum of inclina-
tion for the work,

■ Aptitude, regardless of whether it is th£ product of hereditary or
environmental and educational influences, can only be determined by
testing. In business enterprises in a market economy this usually takes
the form of a trial period. The Taylor system involves an attempt to work
out rational methods of accomplishing this.

Practice, and the resulting skill, can only be perfected by rational and
/continuous specialization. Today, it is worked out on a basis which is
largely empirical, guided by considerations of minimizing costs in the
interest of profitability, and limited by these interests. Rational specializa-
tion with reference to physiological conditions is only in its beginnings
(witness again the Taylor system).

Inclination to work may be oriented to any one of the ways which
are open to any other mode of action (see above, ch. I, sec. 2). But in the
specific sense of incentive to execute one's own plans or those of persons
supervising one's work, it must be determined either by a strong self-
interest in the outcome, or by direct or indirect compulsion. The latter is
particularly important in relation to work which executes the dispositions
of others. This compulsion may consist in the immediate threat of physi-
cal force or of other undesirable consequences, or in the probability that
unsatisfactory performance will have an adverse effect on earnings.

The second type, which is essential to a market economy, appeals im-
mensely more strongly to the worker's self-interest. It also necessitates
freedom of selection according to performance, both qualitatively and
quantitatively, though naturally from the point of view of its bearing on
profit, In this sense it has a higher degree of formal rationality, from the
point of view of technical considerations, than any kind of direct compul-
sion to work. It presupposes the expropriation of the workers from the

25 ] Conditions of CahufabUity of Labor Productivity i 5 1

means of production by owners is protected by force. As compared with
direct compulsion to work, this system involves the transferral, in addi-
tion to the responsibility for reproduction (in the family), of part of the
worries about selection according to aptitude to the workers themselves.
Further, both the need for capital and the capital risks are, as compared
with the use of unfree labor, lessened and made more calculable. Finally,
through the payment of money wages on a large scale, the market for
goods which are objects of mass consumption is broadened.

Other things being equal, positive motives for work are, in the ab-
sence of direct compulsion, not obstructed to the same extent as they are
for unfree labor. It is true, however, that whenever technical specializa-
tion has reached very high levels, the extreme monotony of operations
tends to limit incentives to purely material wage considerations. Only
when wages are paid in proportion to performance on a piece-rate basis
is there an incentive to increasing productivity. In the capitalistic system,
the most immediate bases of willingness to work are opportunities for
high piece-rate earnings and the danger of dismissal,
* The following observations may be made about the situation of free
labor separated from the means of production: (a) Other things being
equal, the likelihood that people will be willing to work on affectual
grounds is greater in the case of specification of functions than in that of
specialization of functions. This is true because the product of the indi-
vidual's own work is more clearly evident. In the nature of the case, this
is almost equally true wherever the quality of the product is important;
(b) traditional motivations to work are particularly common in agricul-
ture and in home industries — both cases where also the general attitude
toward life is traditional. It is characteristic of this that the level of per-
formance is oriented either to products which are stereotyped in quantity
and quality or to a traditional level of earnings, or both. Where such an
attitude exists, it is difficult to manage labor on a rational basis, and
production cannot be increased by such incentives as piece rates. Ex-
t perience shows, on the other hand, that a traditional patriarchal relation-
ship to a lord or owner is capable of maintaining a high level of affectual
incentive to work; (c) motivations based on absolute values are usually
the result of religious orientations or of the high social esteem in which
the particular form of work as such is held. Observation seems to show
that all other sources of motivations directed to ultimate values are only
transitional.

It goes without saying that the "altruistic" concern of the worker for
his own family is a typical element of duty contributing to willingness
to work generally.

2. The appropriation of the means of production and personal con-

I 5 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck- 11

trol, however formal, over the process of work constitute one of the
strongest incentives to unlimited willingness to work. This is the funda-
mental basis of the extraordinary importance of small units in agriculture,
whether in the form of small-scale proprietorship or small tenants who
hope to rise to the status of owner. The classical locus of this type of
organization is China. The corresponding phenomenon in the function-
ally specified skilled trades is most marked in India, but it is very im-
portant in all parts of Asia and also in Europe in the Middle Ages. In
the latter case, the most crucial conflicts have been fought out over the
issue of formal autonomy of the individual worker. The existence of the
small peasant in a sense depends directly on the absence of capital oc-
counting and on retaining the unity of household and enterprise. His
is a specified arid not a specialized function, and he tends both to devote
more intensive labor to it and to restrict his standard of living in the
interest of maintaining his formal independence. In addition, this system
of agriculture makes possible the use of all manner of by-products and
even "waste" in the household in a way which would not be possible in
a larger farm unit. All the information we have available goes to show
that capitalistic organization in agriculture is, where management is in
the hands of the owner, far more sensitive to cyclical movements than
small-scale peasant farming (see the author's figures in the Verhandlun-
gen des deutschen juristentogs, vol. xxiv). *'*

In industry, the corresponding small-scale type has retained its im-
portance right up to the period of mechanization and of the most minute
specialization and combination of functions. Even as late as the sixteenth
century, as actually happened in England [1555], it was possible simply
to forbid the operation of workshops like that of "Jack of Newbury"
without catastrophic results for the economic situation of the workers,
This was true because the combination in a single shop of looms, ap-
propriated by one owner and operated by workers, could not, under the
market conditions of the time, without any far-reaching increase in the
specialization and co-ordination of labor functions, lead to an improve-
ment in the prospect of profit for the entrepreneur large enough to
compensate with certainty for the increase in risk and the cost of operat-
ing the shop. Above all, in industry an enterprise with large investments
in fixed capital is not only, as in agriculture, sensitive to cyclical fluctua-
tions, but also in the highest degree to every form of irrationality — that
is, lack of calculability — in public administration and the administration
of justice, as it existed everywhere outside the modern Western World.
It has hence been possible, as in the competition with the Russian "fac-
tory" and everywhere else, for decentralized domestic industry to domi
nate the field. This was true up to the point, which was reached before

25 ] Conditions of Calculability of Labor Productivity i 5 3

the introduction of mechanical power and machine tools, where, with
the broadening of market opportunities, the need for exact cost account-
ing and standardization of product became marked. In combination with
technically rational apparatus, using water power and horse-gins, this
led to the development of economic enterprises with internal specializa-
tion. Mechanical motors and machines could then be fitted in. Until this
point had been reached, it was possible for all the large-scale industrial
establishments, which occasionally had appeared all over the world, to be
eliminated again without any serious prejudice to the economic situation
of all those involved in them and without any serious danger to the
interest of consumers. This situation changed only with the appearance
of the factory. But willingness to work on the part of factory labor has
been primarily determined by a combination of the transfer of responsi-
bility for maintenance to the workers personally and the corresponding
powerful indirect compulsion to work, as symbolized in the English
workhouse system, and it has permanently remained oriented to the com-
pulsory guarantee of the property system. This is demonstrated by the
marked decline in willingness to work at the present time which resulted
from the collapse of this coercive power in the [1918] revolution.

26. Forms of Communism

Communist arrangements for the communal or associational organiza-
tion of work which are indifferent to calculation are not based on a con-
sideration of means for obtaining an optimum of provisions, but, rather,
on direct feelings of mutual solidarity. They have thus tended histori-
cally, up to the present, to develop on the basis of common value attitudes
of a primarily non-economic character. There are three main types : ( 1 )
The household communism of the family, resting on a traditional and
■ affectual basis; (2) the military communism of comrades in an army; (3)
the communism based on love and charity in a religious community.

Cases (2) and (3) rest primarily on a specific emotional or charis-
matic basis. Always, however, they either (a) stand in direct conflict
with the rational or traditional, economically specialized organization
of their environment; such communist groups either work themselves
or, in direct contrast, are supported purely by contributions from patrons,
or both. Or (b) they may constitute a budgetary organization of privi-
leged persons, ruling over other household units which are excluded
from their organization, and are supported by voluntary contributions
or liturgies of the latter. Or (c) finally, they are consumer household

I 5 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11

units, distinct from any profit-making enterprises but drawing income
from them, and thus in an associative relationship with them.

The first of these modes of support (a) is typical of communities
based on religious belief or some Weltanschauung — such as monastic
communities which renounce the world altogether or carry on commu-
nal labor, sectarian groups and Utopian socialists.

The second mode (b) is typical of military groups which rest on a
wholly or partially communistic basis. Examples are the "men's bouse"
in many primitive societies, the Spartan syssitia, the Ligurian pirate
groups, the entourage of Calif Omar, the communism, in consumption
and partly in requisitioning, of armies in the field in every age. A sim-
ilar state of affairs is found in authoritarian religious groups — as in the
Jesuit state in Paraguay and communities of mendicant monks in India
and elsewhere.

The third mode (c) is typical of family households in a market econ-
omy.

Willingness to work and consumption without calculation within
these communities are a result of the non-economic attitudes character-
istic of them. In the military and religious cases, they are to an appreci-
able extent based on a feeling of separateness from the ordinary everyday
world and of conflict with it. Modern communist movements are, so far
as they aim for a communist organization of the masses, dependent on
"value-rational" appeals to their disciples, and on arguments from expedi-
ency (zweckrationaO in their [external] propaganda. In both cases,
thus, they rest their position on specifically rational considerations and,
in contrast to the military and religious communities, on considerations
concerned with the everyday profane world. 10 Their prospects of success
under ordinary conditions rest on entirely different subjective conditions
than those of groups which are oriented to exceptional activities, to other-
worldly values, or to other primarily non-economic considerations.

27. Capital Goods and Capital Accounting

The embryonic forms of capital goods are typically found in com-
modities traded in inter-local [as against local] or inter-tribal exchange,
provided that "trade" (see sec. 29) appears as an activity clearly distinct
from the mere procurement of goods on a household (budgetary) basis.
For the swapping (EigenkandeV) of household economies — trading-o£F
of surpluses— ^cannot be oriented to capital accounting. The inter-tribally
sold products of household, clan or tribal crafts are commodities, while
the means of procurement, as long as they remain one's own output, are

xj ] Cafital Goods and Cafital Accounting i 5 5

only tools or raw materials, but not capital goods. The same goes for the
market products and means of procurement of the peasant and the feudal
lord as long as economic activity is not oriented to capital accounting, if
only in its most primitive forms such as were incipient already in [the
manual oh estate management of the elder] Cato.

It is obvious that the internal movement of goods within the domain
of a feudal lord or of an oifeos, including occasional exchange and the
common Forms of internal exchange of products, is the antithesis of trade
based on capital accounting. The trade engaged in by an oikos, like that
of the Pharaohs, even when it is not concerned solely with provision for
need and thus does not act as a budgetary unit but as one oriented to
profit, is not for present purposes necessarily capitalistic. This would
only be the case if it were oriented to capital accounting, particularly to
an ex-ante estimate in money of the chances of profit from a transaction.
Such estimates were made by the professional travelling merchants,
whether they were engaged in selling on commenda basis for others, or
in disposing of goods co-operatively marketed by an organized group. It
is here, in the form of "occasional" enterprise, that the source of capital
accounting and of the use of goods as capital is to be found.

Human beings (slaves and serfs) and fixed installations of all types
which are used by seigneurial owners as sources of rent are, in the nature
of the case, only rent-producing household property and not capital
goods, similar to the securities which today yield interest or dividends
for a private investor oriented to obtain an income from his wealth and
perhaps some speculative gains. Investment of this household type should
be clearly distinguished from the temporary investment of business
capital by an enterprise. Goods which a lord over land or persons receives
from his dependents in payment of the obligations due him by virtue of
his seigneurial powers, and then puts up for sale, are not capital goods
for the present terminological purposes, but only commodities. In such
cases capital accounting — and above all, estimates of cost — are lacking
in principle, not merely in practice. On the other hand, where slaves are
used in an enterprise as a means of profit, particularly where there is an
organized slave market and widespread purchase and sale of slaves, they
do constitute capital goods. Where corvee-based production units QVron-
betriehe) work with a labor force of (hereditary) dependents who are
not freely alienable and transferable, we shall not talk of capitalistic eco-
nomic establishments, but of profit-making economic establishments with
bound labor, regardless of whether we are dealing with agricultural pro-
duction or unfree household industry. The decisive aspect is whether the
tie is mutual — whether the lord is also bound to the worker.

In industry, production for sale by free workers with their own raw

I J 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11

materials and tools ("price work") is a case of small-scale capitalistic
enterprise. The putting-out industry is capitalistic, but decentralized;
whereas every case of an organized workshop under capitalistic control is
centralized capitalistic organization. All types of "wage Work" of oc-
casional workers, whether in the employer's or in the worker's home, are
mere forms of dependent work which are sometimes exploited in the
interest of the budgetary economy, sometimes in the interest of the
employer's profit.

The decisive point is thus not so much the empirical fact, but rather
the theoretical possibility of the use of capital accounting.

28. The Concept of Trade and Its Principal Forms

In addition to the various types of specialized and specified functions,
which have already been discussed, every market economy (even, nor-
mally, one subject to substantive regulation) knows another function:
namely mediation in the process of disposing of a producer's own control
over goods or acquiring such control from others. This function can be
carried out tn any one of the following forms: ( 1 ) By the members of the
administrative staff of an organized economic group, in return for pay-
ments in kind or in money which are fixed or vary with the services
performed; (2) by an organized group created especially to provide for
the selling and purchasing needs of its members; (3) by the members of
a specialized occupational group working for their own profit and remu-,
nerated by fees or commissions without themselves acquiring control of
the goods they handle; they act, that is, as agents, but in terms of a wide
variety of legal forms; (4) by a specialized occupational group engaged
in trade as a capitalistic profit-making enterprise (trade on own account).
Such persons purchase goods with the expectation of being able to resell
them at a profit, or sell for future delivery with the expectation of being
able to cover their obligations before that date at a profitable figure. This
may be done by buying and selling entirely freely in the market or sub-
ject to substantive regulation; (5) by a continuous regulated process,
under the aegis of an organized political group, of expropriation of goods
against compensation and of voluntary or enforced disposal of these goods
to customers, again against compensation: compulsory trade; (6) by the
professional lending of money or procurement of credit for the purpose
of effectuating business payments or for the acquisition of means of pro-
duction on credit; such transactions may be with business enterprises or
with other organized groups, particularly political bodies. The economic

28 ] _ "Trade" and Its Principal Forms i 5 7

function of the credit may be to finance current payments or the acquisi-
tion of capita] goods.

Cases (4) and (5), and only these, will he called "trade." Case (4)
is "free" trade, case (5) "compulsory monopolistic" trade.

Type (r) is illustrated for budgetary units by the negj*> ores and
actores who have acted on behalf of princes, landlords, monasteries, etc,
and for profit -ma king enterprises by various types of travelling salesmen;
type (2) is illustrated by various kinds of co-operative buying and selling
agencies, including consumers' co-operative societies; type (3) includes
brokers, commission merchants, forwarding agents, insurance agents,
and various other kinds of agents; type (4) is illustrated for the case of
free market transactions by modern trade, and for the regulated case by
various types of heteronomously imposed or autonomously agreed divi-
sions of the market with an allocation of the transactions with certain
customers or of the transactions in certain commodities, or by the sub-
stantive regulation of the terms of exchange by the order of a political
body or some other type of co-operative group; type C?) is illustrated by
t the state monopoly of the grain trade.

29. The Concept of Trade and Its Principal Forms —
(Continued)

Free trade on own account (type 4), which alone will be dealt with
for the present, is always a matter of profit-making enterprise, never of
budgetary administration. It is hence under all normal conditions, iT not
always, a matter of earning money profits by contracts of purchase and
sale. It may, however, be carried on (a) by an organization subsidiary
to a budgetary economy, or (b) it may be an inseparable part of a
total function through which goods are brought to a state of local
consumability, '

Case (a) is illustrated by members of a budgetary unit designated
specifically to dispose of surpluses of that unit's production on their own
account. If, however, it is a matter simply of "occasional" sale by differ-
ent members at different rimes, it is not even a subsidiary enterprise, but
where the members in question devote themselves entirely and on their
■ own financial responsibility to sale or purchase, it is an example of the
type (4), though somewhat modified. If, on the other hand, they act for
the account of the unit as a whole, it is a case of the type (1).

Case (b) is illustrated by peddlers and other small traders who travel
with their goods, and who thus primarily perform the function of trans-
porting goods to the place of sale. They have hence been mentioned
above in connection with the function of transportation. Travelling
commends traders may be a transitional form between types (3) an d

I 5 8 SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Ch. II

(4). Whether the transportation service is primary and the trading profit
secondary, or vice versa, is generally quite indefinite. In any case, all
persons included in these categories are 'traders."

Trade on the individual's own account (type 4) is always carried on
on the basis of appropriation of the means of procurement, even though
his control may he made possible only by borrowing. It is always the
trader who bears the capital risk on his own account; and, correspond-
ingly, it is he who, by virtue of his appropriation of the means of pro-
curement, enjoys the opportunity for profit.

Specialization and specification of functions in the field of free trade
on own account may take place in a variety of different ways. From an
economic point of view, it is for the present most important to distinguish
them according to the types of economic unit between which the mer-
chant mediates: (i) Trade between households (budgetary units) with a
surplus and other households which consume the surplus; GO trade be-
tween profit-making enterprises, themselves producers or merchants, and
households (budgetary units) which consume the product. The latter
include, of course, all types of organizations, in particular, political
bodies; (in) trade between one profit-making enterprise and another.

The first two cases come close to what is usually called "retail trade,"
which involves sale to consumers without reference to the sources from
which the goods were obtained. The third case corresponds to "wholesale
trade."

Trade may be oriented to the market or to customers. In the former
case it may be a consumers' market, normally with the goods actually,
present. It may, on the other hand, be a market for business enterprises,
in which case the goods may actually be present, as at fairs and exposi-
tions (usually though not necessarily, seasonal), or the goods may not
be present, as in trade on commodity exchanges (usually, though not
necessarily, permanent). If trade is oriented directly to customers, pro-
viding for the needs of a relatively fixed group of purchasers, it may be
to households (budgetary units), as in retail trade, or to profit-making
enterprises. The latter may in turn be producing units or retail enter-
prises or, finally, other wholesale enterprises. There may be various levels
of middlemen in this sense, varying from the one nearest the producers
to the one who sells to the retailer.

According to the geographical source of the goods disposed of, trade
may he "interlocal" or "local."

The merchant may be in a position in fact to secure purchases on his
own terms from the economic units which sell to him — putting-out trade.
He may, on the other hand, be in a position to dictate the terms of his
sales to the economic units which buy from him — traders' monopoly.

20 ] "Trade" and Its Principal Forms (com.) i 5 9

The first type is closely related to the putting-out organization of industry
and is generally found combined with it. The second is "substantively
regulated" trade, a variety of type (4).

It goes without saying that every market-oriented business enterprise
must dispose of its own goods, even if it is primarily a producing enter-
prise. This type of marketing is not, however, "mediation" in the sense
of the above definition so long as no members of the. administrative staff
are specialized for this and only this purpose (such as travelling sales-
man). Only then is a specialized "trading" function being performed.
There are, of course, all manner of transitional forms.

The calculations underlying trading activity will be called "specula-
tive" to the extent to which they are oriented to possibilities, the realiza-
tion of which is .regarded as fortuitous and is in this sense uncslculable.
In this sense the merchant assumes the burden of "uncertainty." 31 The
transition from rational calculation to what is in this sense speculative
calculation is entirely continuous, since no calculation which attempts
to forecast future situations can he completely secured against unexpected
"accidental" factors. The distinction thus has reference only to a differ-
ence in the degree of rationality.

The forms of technical and economic specialization and specification
of function in trade do not differ substantially from those in other fields.
The department store corresponds to the factory in that it permits the
most extensive development of internal specialization of function.

29a. The Concept of Trade and Us Principal Forms —
(Concluded^)

The term "banks" will be used to designate those types of profit-
making "trading" enterprise which make a specialized function of ad-
ministering or procuring money.

Money may be administered for private households by taking private
deposit accounts and caring for the property of private individuals. It may
also be administered for political bodies, as when a bank carries the
account of a government, and for profit-making enterprise, by carrying
business deposits and their current accounts.

Money may be procured for the needs of budgetary units, as in ex-
tending private consumption credit to private individuals, or in extending
credit £0 political bodies. It may be procured for profit-making enterprises
for the purpose of making payments to third persons, as in the creation
of bills of exchange or the provision of checks or drafts for remittances.
It may also be used to make advances on future payments due from

I 6 O SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Ch. II

customers, especially in the form of the discounting of bills of exchange.
It may, finally, be used to give credit for the purchase of capital goods.

Formally, it is indifferent whether the bank (i) advances this money
from its own funds or promises to make it available on demand, as in the
provision for over-drafts of a current account, and whether the loan is or
is not accompanied by a pledge or any other form of security provided by
the borrower; or, (2,) whether the bank, by some type of guarantee or in
some other manner, influences others to grant the funds.

In practice, the business policy of banks is normally aimed to make
a profit by relending funds which have been lent to them or placed at
their disposal.

The funds which a bank lends may be obtained from stocks of bul-
lion or of coin from the existing mints which it holds on credit, or by its
own creation of certificates (fcafcco-money) or of means of circulation
(bank notes), or, finally, from the deposits of private individuals who
have placed their money at its disposal.

Whether a bank borrows on its own to obtain the funds it lends out
or creates means of circulation, it must, if it is acting rationally, attempt
to provide for coverage to maintain its liquidity — that is, it must keep a
sufficient stock of cash reserves or arrange the tenns of credit granted in
such a manner that it can always meet its normal payment obligations.

As a rule, the observance of liquidity ratios by money-creating (i.e.,
note-issuing) banks is provided for in imposed regulations by organiza-
tions (merchant guilds or political bodies). These regulations are at the
same time usually designed to protect the chosen monetary system of an
area as far as possible against changes in the substantive validity of the'
money, and thus to protect the (formal) rationality of the economic cal-
culations of budgetary units, above all those of the political body, and of
profit-making enterprises against disturbances from (substantive) ir-
rationalities. In particular, the most stable rate of exchange possible for
one's own money against the monies of other monetary areas, with which
trade or credit relations exist or are desired, is usually striven for. This
type of monetary policy, which atfempts to control the factors of irration-
ality in the monetary field, will, following G. F. Knapp, be called "lytric"
policy. In the strictly laissez-faire state, this is the most important func-
tion in the realm of economic policy which the state would undertake.
In its rational form this type of policy is entirely restricted to the modern
state.

The policy measures of the Chinese with respect to copper and paper
money and the Roman coinage policy will be discussed at the proper
point, but they did not constitute a modem lytric monetary policy. Only
the banco-money policy of the Chinese guilds, which formed the model

29a ] "Trade" and Its Principal Forms (concl.) 1 6 1

for the Hamburg hanco mark, came up to modern standards of -rational-
ity."

The term "financing" (Finanziervngsgeschafte') will be applied to all
business transactions which are oriented to obtaining control, in one of
the following ways, of favorable opportunities for profit-making by busi-
ness enterprise, regardless of whether they are carried on by banks or by
other agencies, including individuals, as an occasional source of profit
or as a subsidiary enterprise, or as part of the speculative operations of a
"financier": (a) through the transformation of rights to appropriated
profit opportunities into securities or other negotiable instruments, and
by the acquisition of these securities, either directly or through such
subsidiary enterprises as are described below under (c); (b) by the sys-
tematic tender (or, occasionally, refusal) of business credit; (c) through
compulsory joining, if necessary or desired, of hitherto competing enter-
prises, either (i) in the form of monopolistic regulation of enterprises
at the same stage of production (cartellization), or (ii) in the form of
monopolistic fusion under one management of hitherto competing enter-
prises for the purpose of weeding out the least profitable ones (merger),
or (iii) in the not necessarily monopolistic form of the fusion of special-
ized enterprises at successive stages of a production process (vertical com-
bination), or finally (iv) in the form of an attempted domination of
many enterprises through operations with their shares (trusts, holding
companies) or the creation of new enterprises for the purpose of increas-
ing profits or merely to extend personal power (financing as such).

Of course, financing operations are often carried out by banks and,
as a general rule, unavoidably involve their participation. But the main
control often lies in the hands of stock brokers, like Harriman, or of
individual large-scale entrepreneurs in production, like Carnegie. The
formation of cartels is also often the work of large-scale entrepreneurs,
like Kirdorf; while that of trusts is more likely to be the work of "finan-
ciers," like Gould, Rockefeller, Stinnes, and Ratbenau. This will be
further discussed below.

30. The Conditions of Maximum Formal Rationality of
Capital Accounting

The following are the principal conditions necessary for obtaining a
maximum of formal rationality of capital accounting in production enter-
prises: (1) complete appropriation of all material means of production
by owners and the complete absence of all formal appropriation of op-
portunities for profit in the market; that is, market freedom; (2) complete

I 6 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. 11

autonomy in the selection of management by the owners, thus complete
absence of formal apptopriation of rights to managerial functions; (3)
complete absence of appropriation of jobs and of opportunities for earn-
ing by workers and, conversely, the absence of appropriation of workers
by owners. This implies free labor, freedom of the labor market, and
freedom in the selection of workers; (4) complete absence of substantive
regulation of consumption, production, and prices, or of other forms of
regulation which limit freedom of contract or specify conditions of ex-
change. This may be called substantive freedom of contract; (5) com-
plete calculability of the technical conditions of the production process;
that is, a mechanically rational technology; (6) complete calculability of
the functioning of public administration and the legal order and a
reliable purely formal guarantee of all contracts by the political authority.
This is a formally rational administration and law; (7) the most complete
separation possible of the enterprise and its conditions of success and
failure from the household or private budgetary unit and its property
interests. It is particularly important that the capital at the disposal of the
enterprise should be clearly distinguished from the private wealth of the
pwners, and should not be subject to division or dispersion through
inheritance. For large-scale enterprises, this condition tends to approach
an optimum from a formal point of view: in the fields of transport,
manufacture, and mining, if they are organized in corporate form with
freely transferrable shares and limited liability, and in the field of agri-
culture, if there are relatively long-term leases for large-scale production
units; (8) a monetary system with the highest possible degree of formal
rationality.

Only a few points are in need of comment, though even these have
already been touched on,

CO With respect to the freedom of labor and of jobs from appropri-
ation, it is tru ■* that certain types of unfree labor, particularly full-fledged
slavery, have guaranteed what is formally a more complete power of
disposal o-°r the worker than is the case with employment for wages.
But there are various reasons why this is less favorable to rationality
and efficiency than the employment of free labor: (a) The amount of
capital which it was necessary to invest in human resources through
the purchase and maintenance of slaves has been much greater than that
required by the employment of free labor; (b) the capital risk attendant
on slave ownership has not only been greater, but specifically irrational
in that slave labor has been exposed to all manner of non-economic in-
fluences, particularly to political influence in a very high degree; (c)
the slave market and correspondingly the prices of slaves have been par-
ticularly subject to fluctuation, which has made a balancing of profit
and loss on a rational basis exceedingly difficult; (d) for similar reasons,

30 ] Formal Rationality of Capital Accounting i 6 3

particularly involving the political situation, there has been a difficult
problem of recruitment of slave labor forces; (e) when slaves have been
permitted to enjoy family relationships, this has made the use of slave
labor more expensive in that the owner has had to bear the cost of main-
taining the women and of rearing children. Very often, he has had no
way in which he could make rational economic use of these elements as
part of his laboi force; (f) hence the most complete exploitation of slave
labor has been possible only when they were separated from family rela-
tionships and subjected to a ruthless discipline. Where this has hap-
pened it has greatly accentuated the difficulties of the problem of recruit-
ment; (g) it has in general been impossible to use slave labor in the
operation of tools and apparatus, the efficiency of which required a high
level of responsibility and of involvement of the operator's self-interest;
(h) perhaps most important of all has been the impossibility of selection,
of employment only after trying out in the job, and of dismissal in ac-
cordance with fluctuations of the business situation or .when personal
efficiency declined.

Hence the employment of slave labor has only been possible in gen-
era! under the following conditions: (a) Where it has been possible to
» maintain slaves very cheaply; (h) where there has been an opportunity
for regular recruitment through a well-supplied slave market; (c) in
agricultural production on a large scale of the plantation type, or in very
simple industrial processes. The most important examples of this type
of relatively successful use of slaves are the Carthaginian and Roman
plantations, those of colonial areas and of the Southern United States,
and the Russian "factories." The drying up of the slave market, which
resulted from the pacification of the Empire, led to the decay of the
plantations of Antiquity. 58 In North America, the same .situation led to
a continual search for cheap new land, since it was impossible to. meet
the costs of slave:: and pay a land rent at the same time. In Russia, the
serf ''factories" were barely able to meet the competition of the kustar
type of household industry and. were totally unable to compete with free
factory labor. I'-ven before the emancipation of the serfs, petitions for
permission to dismiss workers were common, and the factories decayed
with the introduction of shops using free labor.

When workers are employed for wages, the following advantages^
industrial profitability and efficiency are conspicuous: (a) Capital risk
and the necessary capital investment are smaller; (b) the costs of re-
production and of bringing up children fall entirely on the worker. His
wife and children must seek employment on their own account; (c)
largely for this reason, the risk of dismissal is an important incentive to
the maximization of production; (d) it is possible to select the labor
force according to ability and willingness to work.

(2) The following comment may be made on the separation of en-
terprise and household. The separation in England of the producing
farm enterprise, leasing the land and operating with capital accounting,
from the entailed ownership of the land is by no means fortuitous, but

164 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. U

is die outcome of an undisturbed development over centuries which
was characterized by the absence of an effective protection of the status
of peasants. This in turn was a consequence of the country's insular
position. Every joining of the ownershif of land with the cultivation of
the land turns the land into a capital good for the economic unit, thus
increasing the capita] requirements and the capital risks of this unit. It
impedes the separation of the household from the economic establish-
ment; the settlements paid out at inheritance, for instance, burden the
resources of the enterprise. It reduces the liquidity of the entrepreneur's
capital and introduces a number of irrational factors into his capital ac-
counting. Hence the separation of landownership from the organization
of agricultural production is, from a formal point of view, a step which
promotes the rationality of capital accounting. It goes without saying,
however, that any substantive evaluation of this phenomenon is quite
another matter, and its conclusions may be quite different depending on
the values underlying the judgment.

31. The Principal Modes of Capitalistic Orientation of
Profit- Making

The "capitalistic" orientation of profit-making activity (in the case of
rationality, this means: the orientation to capital accounting) can take
a number of qualitatively different forms, each of which represents a
definite type:

1 . It may be orientation to the profit possibilities in continuous buy-
ing and selling on the market ("trade") with free exchange — that is,
absence of formal and at least relative absence of substantive compulsion
to effect any given exchange; or it may be orientation to the profit pos-
sibilities in continuous production of goods in enterprises with capital
accounting.

2. It may be orientation to the profit possibilities in trade and specu-
lation in different currencies, in the taking over of payment functions
of all sorts and in the creation of means of payment; the same with
respect to the professional extension of credit, either for consumption or
for profit-making purposes.

3. It may be orientation to opportunities for predatory profit from
political organizations or persons connected with politics. This includes
the financing of wars or revolutions and the financing of party leaders
by loans and supplies.

4. It may be orientation to the profit opportunities in continuous
business activity which arise by virtue of domination by force or of a
position of power guaranteed by the political authority. There are two

3 1 ] _, Modes of Capitalistic Orientation of Acquisition i 6 5

main sub-types: colonial profits, either through the operation of planta-
tions with compulsory deliveries or compulsory labor or through monopo-
listic and compulsory trade, and fiscal profits, through the farming of
taxes and of offices, whether at home or in colonies.

5. It may be orientation to profit opportunities in unusual transac-
tions with political bodies.

6. It may be orientation to profit opportunities of the following types:
(a) in purely speculative transactions in standardized commodities or in
the securities of enterprises; (b) in the execution of the continuous
financial operations of political bodies; (c) in the promotional financing
of new enterprises in the form of sale of securities to investors; (d) in
the speculative financing of capitalistic enterprises and of various other
types of economic organization with the purpose of a profitable regula-
tion of market situations or of attaining power.

Types (0 and (6) are to a large extent peculiar to the modern West-
em World. The other types have been common all over the world for
thousands of years wherever the possibilities of exchange and money
economy (for type 2) and money financing (for types 3-5) have been
present. In the Western World they have not had such a dominant
importance as modes of profit-making as they had in Antiquity, except
in restricted areas and for relatively brief periods, particularly in times
of war. Where large areas have been pacified for a long period, as in the
Chinese and later Roman Empire, these types have tended to decline,
leaving only trade, money changing, and lending as forms of capitalistic
acquisition. For the capitalistic financing of political activities was every-
where the product of the competition of states with one another for
power, and of the corresponding competition for capital which moved
freely between them. All this ended only with the establishment of the
unified empires.

The point of view here stated has, if the author's memory is accurate,
been previously put forward in the clearest form by j. Plenge in his ,
Von der Diskontpolitik zut Herrschaft tiber den Geldmarkt (Berlin
1913). Before that a similar position seems to have been taken only m
the author's article, "Agrarverhaltnisse im Altertum," 1909 [reprinted in
GAzSW, 1914; cf. 2758.]

It is only in the modern Western World that rational capitalistic
enterprises with fixed capital, free labor, the rational specialization and
combination of functions, and the allocation of productive functions on
the basis of capitalistic enterprises, bound together in a market economy,
are to be found. In other words, we find the capitalistic type of organization
of labor, which in formal terms is purely voluntary, as the typical and
dominant mode of providing for the wants of the masses of the population,

I 6 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

with expropriation of the workers from the means of production and ap-
propriation of the enterprises by security owners. It is also only here
that we find public credit in the form of issues of government securities,
tlie "going public" of business enterprises, the floating of security issues and
financing carried on as the specialized function of rational business
enterprises, trade in commodities and securities on organized exchanges,
money and capital markets, monopolistic organizations as a form of ra-
tional business organization of the entrepreneurial production of goods,
and not only of the trade in them.

This difference calls for an explanation and the explanation cannot
be given on economic grounds alone. Types (3) to (5) inclusive will be
treated here together .as "politically oriented capitalism." The whole of
the later discussiojp will be devoted particularly to the problem of explain-
ing the difference. In general terms, it is possible only to make the fol-
lowing statements:

1 . It is clear from the very beginning that the politically oriented
events and processes which open up these profit opportunities exploited
by political capitalism are irrational from an economic point of view —
that is, from the point of view of orientation to market advantages and
thus to the consumption needs of budgetary units.

2. It is further clear that purely speculative profit opportunities and
pure consumption credit are irrational from the point of view both
of want satisfaction and of the production of goods, because they are de-
termined by the fortuitous distribution of ownership and of market ad-
vantages. The same may also be true of opportunities for promotion and
financing, under certain circumstances; but this is not necessarily always
the case.

Apart from the rational capitalistic enterprise, the modern economic
order is unique in its monetary system and in the commercialization of
ownership shares in enterprises through the various forms of securities.
Both these peculiarities must be discussed — first the monetary system.

32. The Monetary System of the Modern State and the
Different Kinds of Money: Currency Money

1. C a ) The modem*state has universally assumed the monopoly of
regulating tbe monetary system by statute; and (b) almost without ex-
ception, the n ipoly of creating money, at least for coined money.

Originally, purely fiscal considerations were decisive in the creation
of this monopoly — seigniorage Cminting fees) and other profits from

32 ] The Modern Monetary System, Currency Money 167

coinage. This was the motive for the prohibition of the use of foreign
money. But the monopolization of issue of money has not been universal
even up into the modern age. Thus, up until the currency reform [of
1871-1873] foreign coins were current in Bremen.

(c) With the increasing importance of its taxation and its own eco-
nomic enterprises, the state has become both the largest receiver and the
largest maker of payments in the society, .either through its own pay
offices or through those maintained on its behalf. Quite apart from the
monopoly of monetary regulation and issue, because of the tremendous
importance of the financial transactions of the state the behavior of the
state treasurers in their monetary transactions is of crucial significance
for the monetary system — above all, what kind of money they actually ■
have at hand and hence can pay out, and what kind of money they force
on the public as legal tender, and further, what kind of money they
actually accept and what kind they partially or fully repudiate.

Thus, paper money is partialiy repudiated if customs duties have to
be paid in gold, and was fully repudiated (at least ultimately) in the
case of the assignats of the French Revolution, the money of the Con-
federate States of America, and that issued by the Chinese Government
during the Tai Ping Rebellion.

In terms of its legal properties, money can be defined as a "legal
means of payment" which everyone, including also and especially the
public pay offices, is obligated to accept and to pay, either up to a given
amount or without limit. In terms of the behavior of the state (regi-
minal) it may be defined as that money which public pay offices accept
in payment and for which they in turn enforce acceptance in their pay-
ments; legal compulsory money is that money, in particular, which they
impose in their payments. The "imposition" may occur by virtue of exist-
ing legal authority for reasons of monetary policy, as in the case of the
[German silver] Taler and the [French silver] five-franc piece after the
discontinuance — as we know, never really put into effect — of the coining
of silver [1871 and 1876]; or it may occur because the state is incapable
of paying in any other means of payment. In the latter case, an existing
legal authority to enforce acceptance may now be employed for the first
time, or an ad hoc legal authority may be created, as is almost always true
in cases of resort to paper money. In this last case, what usually happens
is that a means of exchange, which was previously by law or de facto
redeemable in definitive money, whether its acceptance could be legally
imposed or not, will now be de facto imposed and by the same token be-
come de facto unredeemable.

By passing a suitable law, a state can turn any object into a "legal

I 6 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11

means of payment" and any chartal object into "money" in the sense of
a means of payment. It can establish for them any desired set of "value
scales" or, in the case of "market money," "currency relations" [see above,
ch. II, sec. 6]. There are, however, certain formal disturbances of the
monetary system in these cases which the state can either not suppress at
all or only with great difficulties',

(a) In the case of administrative money, the forgery of notes, which
is almost always very profitable; and (b) with all forms of metallic
money, the non-monetary use of the metal as a raw material, where its
products have a high value. This is particularly true when the metal in
question is in an undervalued currency relation to others. It is also, in
the case of market money, exceedingly difficult to prevent the export of
the coins to other countries where that currency metal has a higher value.
Finally, it is difficult to compel the offer of a legal monetary metal for
coinage where it is undervalued with respect to the currency money
(coins or paper).

With paper money the rate of exchange of one currency unit of the
metal with its nominal equivalent of paper always becomes too un-
favorable for the metal when redeemability of the notes is suspended,
and this is what happens when it is no longer possible to make payments
in metal money.

The exchange ratios between several kinds of market money may be
determined (a) by fixing the relation for each particular case; (b) by
establishing rates periodically; and (c) by legal establishment of per-
manent rates, as in bimetallism.

In cases (a) and (b) it is usual that only one metal is the effective
currency (in the Middle Ages it was silver), while the others are used
as trading coins with varying rates. The complete separation of the spe-
cific modes of use of different types of market money is raTe in modem
monetary systems, but has at times been common, as in China and in
■ the Middle Ages.

2. The definition of money as a legal means of payment and as the
creature of the "lytric" administration of political bodies is, from a socio-
logical point of view, not exhaustive. This definition, to put it in G. F.
Knapp's words, starts from "the fact of the existence of debts,"' 4 espe-
cially of tax debts to the state and of interest debts of the state. What is
relevant for the legal discharge of such debts is the continuity of the
nominal unit of money, even though the monetary material may have
changed, or, if the nominal unit should change, the "historical defini-
tion" of the new nominal unit. Beyond that, the individual today values
the nominal unit of money as a certain proportional part of his nominal
money income, and not as a chartal piece of metal or note.

32 ] The Modern Monetary System. Currency Money i 6 9

The state can through its legislation — or its administrative staff
through the actual behavior of its pay offices — indeed dictate the formal
validity of the "currency" of the monetary area which it rules.

Provided, that is, that it employs modern methods of administration.
It was not, however, possible at all times, for instance, in China. There
in earlier times it has generally not been possible because payments by
and to the government were too small in relation to the total held of
transactions. Even recently it appears that the Chinese Government has
not been able to make silver into a "limited money" currency with a
gold feserve because it was not sufficiently powerful to suppress the
counterfeiting which would undoubtedly have endued.

However, it is not merely a matter of dealing with existing debts, but
also with exchange in the present and the contraction of new debts to be
paid in the future. But in this connection the orientation of the parties
is primarily to the status of money as a means of exchange [see above,
ch. II, sec, 6], and thus to the probability that it will be at some future
time acceptable in exchange for specified or unspecified goods in price
relationships which are capable of approximate estimate.

1. Under certain circumstance, it is true, the probability that urgent
debts can be paid off to the state or private individuals from the pro-
ceeds may also be importandy involved. This case, may, however, be
left out of account here because it only arises in emergency situations.

2. In spite of the fact that it is otherwise absolutely correct and
brilliantly executed, hence of permanently fundamental importance, it
is at this point that the incompleteness of G. F. Knapp's Staatltche
Theorie des Geldes becomes evident.

Furthermore, the state on its part needs the money which it receives
through taxation or from other sources also as a means of exchange,
though not only for that purpose, but often in fact to a very large extent
for the payment of interest on its debt. But its creditors, in the latter case,
will then wish to employ it as a means of exchange; indeed this is the
main reason why they desire money. And it is almost always true that
. the state itself needs money to a large degree, sometimes even entirely, as
a means of exchange to cover future purchases of goods and supplies in ,
the market. Hence, however necessary it is to distinguish it analytically,
it is not, after all, the fact that money is a means of payment which is
decisive.

The exchange possibility of money against other specific goods, which
rests on its valuation in relation to marketable goods, will be called its
"substantive" validity, as opposed to its formal, legal validity as a means
of payment and the frequently existing legal compulsion for its formal
u** as ^ means of exchange.

I 7 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

In principle, as an observable fact, a monetary unit has a substantive
valuation only in relation to definite types of goods and only for each
separate individual as his own valuation on the basis of the marginal
utility of money for him, which will vary with his income. This marginal
utility is changed for the individual with any increase in the quantity of
money at his disposal. Thus the marginal utility of money to the issuing
authority falls, not only, but above all, when it creates administrative
money and uses it for obtaining goods by exchange or forces it on the
public as a means of payment. There is a secondary change in the same
direction for those persons who deal with the state and who, because of
the higher prices resulting from the lowered marginal utility of money
to public bodies, become the possessors of larger money stocks. The
"purchasing power" now at their disposal — that is, the lowering of the
marginal utility of money for these possessors — can in turn result in an
increase in prices paid to those from whom they purchase, etc. If, on
the other hand, the state were to withdraw from circulation part of the
notes it receives — that is, if it should not pay them out again, but destroy
them — the result would be that the marginal utility of money of its
lessened money stocks would rise, and it would have to curtail its ex-
penditures correspondingly, that is, it would reduce its demand prices
appropriately. The results would be the exact opposite of those just out-
lined. It is hence possible for administrative money, though by no
means only this, to have an important effect on the price structure in
any given monetary area. (The speed at which this will occur and the
different ways in which it affects different goods cannot be discussed
here).

3. A cheapening and increase in the supply, or vice versa, a rise in
cost and curtailment of the supply in the production of monetary metals
could have a similar effect in all countries using it for monetary purposes.
Monetary and non-monetary uses of metals are closely interdependent,
but the only case in which the non-monetary use of the metal has been
decisive for its valuation as money has been that of copper in China.
Gold will enjoy an equivalent valuation in the nominal unit of gold
money less costs of coining as long as it is used as a means of payment
between monetary areas and is also the market money in the monetary
areas of the leading commercial powers. In the past this was true also of
silver and would be today if silver were still in the same position as
gold. A metal which is not used as a means of payment between mone-
tary areas, but constitutes market money in some of them, will naturally
have a definite value in terms of the nominal monetary unit of those-
areas. But these in turn will, according to the costs of adding to the sup-
ply and according to the quantities in circulation, and, finally, according

32 ] The Modern Monetary System. Currency Money i 7 r

to the so-called "balance of payments," have a fluctuating exchange re-
lationship to other currencies. Finally, a precious metal which is uni-
versally used for restricted coinage into administrative money, but not as
market money, is primarily valued on the basis of its non-monetary use.
The question is always whether the metal in question can be profitably
produced and at what rate. When it is completely demonetized, this
valuation depends entirely on its money cost of production reckoned in
international means of payment in relation to the non-monetary demand
for it. If, on the other hand, it is used universally as market money and
as an international means of payment, its valuation will depend on costs
in relation primarily to the monetary demand for it. When, finally, it has
a limited use as market or administrative money, its valuation will be
determined in the long run by whichever of the two demands for it, as
expressed in terms of international means of payment, is able to afford
better to pay the costs of production. If its use as market money is
limited to a particular monetary area, it is unlikely in the long run that
its monetary use will be decisive for the valuation, for the exchange rate
of such special -standard areas to other monetary areas will tend to fall,
and it is only when international trade is completely cut off— as in China
and Japan in the past, and in the areas still actually cut off from each
other after the war today — that this will not affect domestic prices. The
same is true for the case of a metal used as regulated [i.e., limited
coinage] administrative money; the stricdy limited possibility of the use
of the metal as money could be decisive for its valuation only if it would
be minted in great quantities. The long-run outcome would in this case,
however, be similar to that of a metal used as market money only in a
restricted area.

Though it was temporarily realized in practice in China, the monop-
olization of the total production and use of a monetary metal is essen-
tially a theoretical, limiting case. If several competing monetary areas
• are involved and wage labor is used, it does not alter the situation as
much as possibly might be expected. For if all payments bv government
agencies were made in terms of this metal, every attempt to limit its
coinage or to tax it very heavily, which might well yield large profit,
would have the same result as it did in the case of the very high Chinese
seigniorage. First, in relation to the metal the monev would become
very highly valued, and if wage labor were used, mining operations
would to a large extent become unprofitable. As the amount in circula-
tion declined, there would result a "contra-inflation"; and it is possible,
as actually happened in China where this led at times to complete
freedom of coinage, that this would go so far as to induce the use of
money substitutes and a large extension of the area of natural economy.
This also happened in China. If a market economy were to be main-

I 7 2. SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11

tained, it would be hardly possible for monetary policy in the long run
to act otherwise than as if free coinage were legally in force. The only
difference is that minting would no longer be left to the initiative of
interested parties. With complete socialism, on the other hand, the
problem ot money would cease to be significant and the precious metals
would hardly be produced at all.

4. The fact that the precious metals have normally become the
monetary standard and the material from which money is made is his-
torically an outcome of their function as ornaments and hence, spe-
cifically, as gifts. But apart from purely technical factors, this use was
also determined by the fact that they were goods which were typically "
dealt with by weight. Their maintenance in this function is not at first
sight obvious since today, for all except the smallest payments, everyone
normally uses notes, especially bank-notes, and expects to receive them
in payment. There are, however, important motives underlying retention
of metal standards.

5. In all modern states, not only is the issue of money in the form
of notes legally regulated, but it is monopolized by the state. It is either
carried out directly by the state itself, or by one or a few issuing agencies
enjoying special privileges but subject to the control of the state — the
banks of issue.

6. The term "public currency money" (regiraiwa/es Kurantgeldy 5
will be applied only to money which is actually paid out by public
agencies and acceptance of which is enforced. On the other hand, any
other money which, though not paid out under compulsory acceptance,'
is used in transactions between private individuals by virtue of formal
legal provisions, will be called "accessory standard money." Money
which must legally be accepted in private transactions only up to a
given maximum amount, will be called "change" (.Scheidegeld*). (This
terminology is based on that of Knapp. This is even more definitely true
in what follows.)

"Definitive" currency money means public currency money; whereas
any type of money is to be called "provisional" currency money so far
as it is in fact effectively exchangeable for or redeemable in terms of
definitive currency.

7. In the long run, public currency money must naturally coincide
with the effective currency. It cannot be a possibly separate, merely
"official" legal tender currency. Effective currency, however, is neces-
sarily one of three things: (a) free market money; (b) unregulated; or
(c) regulated administrative money. The public treasury does not make
its payments simply by deciding to apply the rules of a monetary system
which somehow seems to it ideal, but its'acts are determined by. its own
financial interests and those of important economic groups.

32 ] The Modern Monetary System. Currency Money i 7 3

With regard to its chartal form, an effective standard money may be
metallic money or note money. ss Only metallic money can he a free
market money, but this is not necessarily the case for all metallic money.

It is free market money when the lytric administration will coin any
quantity of the standard metal or will exchange it for chartal coins —
"hylodromy,"'' 7 According, then, to the precious metal which is chosen
as the standard, there will be an effective gold, silver, or copper standard.
Whether the lytric administration is in fact in a position to maintain an
actual hylodromic system does not depend simply on its own desires,
but on whether individuals are interested in presenting metal for coinage.

It is thus possible for hylodromy to exist "officially" without existing
"effectively." Whatever the official position may he, it is not effective
(a) when, given hylodromy with several metals, one or more of these is
at the official rate imdervalued with respect to the market price of the
raw material. In that case, naturally, only the overvalued metal will be
offered to the rmnt for coinage and to creditors in payments. If the public
pay offices do not participate in this trend, the overvalued coins will pile
up in their hands until they, too, have nothing else to offer in their pay-
ments. If the price relation is rigidly enough maintained, the under-
valued coins will then he melted down, or they will be exchanged by
weight, as commodities, against the coins of the overvalued metal.

(b) Hylodromy is also not effective if persons making payments,
including especially public agencies under stress of necessity, continually
and on a large scale make use of their formal right or usurped power to
compel acceptance of another means of payment, whether metal or notes,
which is not presently provisional [i.e. redeemable] money, but either has
been accessory money or, if previously provisional, has ceased to be re-
deemable because of the insolvency of the issuing agency.

In case (a) hylodromy always ceases, and the same thing happens in
case (b) when accessory forms of money or forms which are no longer
effectively provisional are forced on the public persistently on a large
scale.

The outcome in case (a) is to confine the maintenance of the fixed
rate to the overvalued metal, which then becomes the only free market
money; the result is thus a new- metallic, standard. In case (b) the
accessory metal or notes which are no longer effectively provisional be-
come the standard money. In, the first case we get a "restricted money"
standard; in the second, a paper standard.

It is also possible for hylodromy to he effective without being official
in the sense of being legally established.

An example is the competition of the various coining authorities in
the Middle Ages, determined by their fiscal interest in seigniorage, to

I 7 4 SOCIOLOGICAL CATEGORIES OP ECONOMIC ACTION [ Ck. II

mint as much as possible of the monetary metals. There was no formal
establishment of hylodiomy at that time, but the actual situation was
much as if there had been.

In view of what has just been said, a "monometallic legal standard,"
which may be gold, silver, or copper, will be said to exist when one metal
is by law hylodromic. A "multimetallic legal standard," on the other
hand, exists when more than one metal is used (it may be two or three)
and they are freely coined in a fixed ratio to each other. A "parallel legal
standard" exists when several metals are freely coinable without a fixed
ratio. A standard metal and a metallic standard will only be spoken of
for that metal which is effectively hylodromic, and thus, in practice, con- ,
stitutes actual market money.

Legally, all countries of the Latin Union were under bimetallism
until the suspension of the free coinage of silver, which followed the
German currency reform [1871]. But effectively, as a rule, only the
metal which was for the time being overvalued was actually a standard
metal. The legal stabilization of the exchange ratio, however, worked
so. well that the change was often scarcely noted and there seemed to be
effective bimetallism. But insofar as the ratio shifted, the coins of the
undervalued money became accessory money. (This account of the mat-
ter coincides closely with that of Knapp). At least where there is com-
petition between several autocephalous and autonomous minting agen-
cies, bimetallism is an effective monetary state only as a transitory
phenomenon and is usually only a legal, as opposed to an effective, state
of affairs.

The fact that the undervalued metal is not brought to the mint is ,
naturally the result not of administrative action, but of the changed
market situation in relation to the persistence of the legal coinage ratio
of the metals. It would, of course, be possible for the mint to continue
to coin that metal at a loss as administrative money, but since the non-
monetary uses of the money are more profitable, it ould not be kept in
circulation.

3 3 . Restricted Money

Any type of metallic money which is not hylodromic will be called
"restricted money" (Sperrgeld) if it is currency money. Restricted money
may circulate as accessory money; that is, having a fixed relationship to
some other currency money in the same monetary area. This latter may
be another form of restricted money, paper money, or a market money.

Or restricted money may be oriented to an international standard.
This is the case when it is the sole currency money in its own area, and

33 ] Restricted Money 175

provision is made for having international means of payment available
for making payments abroad, either in coin or in bullion. This is a
"convertible restricted money" standard with a reserve fund of foreign
exchange.

(a) Restricted money will be called "psrticular" when it is the only cur-
rency money, but is not oriented to an international standard.

Restricted money may then be valued internationally ad hoc each
time international means of payment or foreign exchange is bought; or,
when this is possible, it may be given a fixed relation to the international
standard. Taters and silver five-franc pieces were restricted money with
a fixed relation to the currency money of the same country; both were
accessory money. The Dutch silver gulden has been oriented to the
international gold standard after having been "particular" for a short
time after the restriction of coinage, and now the rupee is in the same
position. This is also true of the Chinese dollar which, since the coin-
age regulation of 24 May 1910, is "particular" as long as hyiodromy,
which is not mentioned in the statute, does also de facto not exist. The
prientation to the international gold standard, as recommended by the
American Commission, was rejected.

In the case of. a "restricted" money, free coinage at fixed ratef
(hyiodromy) would be very profitable to the private owners of the
precious metals. Nevertheless, and precisely for this reason, restriction
is maintained because it js feared that the introduction of hyiodromy of
the metal of the formerly restricted money would lead to abandonment
as unprofitable of the hyiodromy of the other metal which was fixed in
too low a ratio to it. The monetary stock of this metal, which would now
become "obstructed" (see next paragraph), would be put to more profita-
ble non-monetary uses. The reason why a rational lytric administration
wishes to avoid this is that the other metal, which would be forced out, is
an international means of payment.

(b) Restricted currency money will be called "obstructed" market
money when, contrary to the case just cited, free coinage exists legally,
but is unprofitable to private business and hence does not take place. This
lack of profitability may rest on an unfavorable relation between, the
market price of the metal and its monetary ratio to the market money,
if a metal, or to paper money. Such money must at some time in the past
have been market money; but, with multimetallism, changes in the rela-
tive market prices of the metals or, with multi- or monometallism, finan-
cial catastrophes, must have made the payment of metallic money by
the government impossible and must have forced it to adopt paper money
and to make it irredeemable. In consequence the private business pre-
conditions of effective hyiodromy have ceased to exist. This money will

176 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

then no longer be used in transactions — at least, insofar as action is
rational.

(0 Apart from restricted currency money, which alone has been
called "restricted money" here, there may be restricted "change" money
— that is, money which must be accepted as means of payment only up
to a given amount. Usually, though not necessarily, it is then inten-
tionally coined at a rate which overvalues it in relation to standard coin
to protect it from being melted down. Usually, then, it has the status of
provisional money in that it is redeemable at certain places. (This case
is a phenomenon of everyday experience and has no special importance
for present purposes.)

All "change" money and many types of restricted metallic money
occupy a place in monetary systems similar to that of note (today:
paper) money. They differ from it only in that the monetary metal has
a non- monetary use which is of some importance. Restricted metallic
money is very nearly a means of circulation when it is provisional money;
that is, when there is adequate provision for redemption in market
money.

34. Note Money

Note money naturally is always administrative money. For the pur-
poses of a sociological theory of money, it is always the specific chartal
form of the document including the specific formal meaning printed on
it which constitutes "money," and not the claim to something else which
it may, though it need not, represent. Indeed, in the case of unredeema-
ble paper money, such a claim is altogether absent.

From a formal legal point of view, note money may consist in (at
least officially) redeemable certificates of indebtedness, acknowledged by
a private individual, as in the case of the English goldsmith? in the
seventeenth century, by a privileged bank, as in the case of bank-notes,
or by a political body, as in the case of government notes. If it is effec-
tively redeemable and thus functions only as -a circulating medium or
provisional money, it may be fully covered— thus constituting a certifi-
cate- — -or it may be covered only sufficiently to meet normal demands
for redemption, which makes it a circulating medium. Coverage may be
in terms of specified weights of bullion (as in the case of a banco-
currency) or of metal coin.

It is almost always the case that note money has first been issued as
a reedemable form of provisional money. In modern times, itjias been

34 3 Note Money i 7 7

typically a medium of circulation, almost always in the form of bank-
notes. They have therefore been denominated in terms of units of an exist-
ing metallic standard.

1. The first part of the last paragraph, naturally, is not true of cases
where one form of note money has been replaced by another; for ex-
ample, where government notes have been replaced by bank-notes, or
vice versa. But this is not a case of a primary issue of money.

z. It is of course true that means of exchange and of payment may
exist which do not take a ehartal form, i.e., are not coins or notes or
other material objects. There is no doubt of this. It is not, however,
expedient to speak of these as "money," but to use the term "unit of
account" or some other term which, according to the particular case,
is appropriate. It is characteristic of money that it is associated with par-
ticular quantities of ehartal artifacts. This is a property which is very far
from being merely external or of secondary importance.

If what has previously been provisional money has its re dee inability
suspended, it is important to distinguish whether the interested parties
regard this as a temporary measure or as definitive for as long as they
can predict. In the first case it would be usual, since metallic money or
bullion is sought after for all international payments, for the note money
to fall to a discount in relation to its nominal metal equivalent. This is
not, however, by any means inevitable; ai.d the discount is often mod-
erate. The discount may, however, become large if the need for foreign
exchange is very acute. In the second case, after a time 3 definitive
"paper money standard" will develop. Then it is no longer appropriate
to speak of a "discount" on the monetary unit, but rather, at least in the
usage of the past, of "debasement."

It is not beyond the range of possibilities that the market price of
the metal of the former market money, which is now obstructed, and in
terms of which the issue is denominated, may for some reason fail radi-
cally relative to international means of payment, while the fall in the
value of the paper currency is less marked. This must have the result (as
it actually did in Austria and Russia) that what was earlier the nominal
unit in terms of weight of the metal (of silver in those two cases) could
now be purchased with a smaller nominal amount in the notes, which
had now become independent of it. That is readily understandable.
Thus, even though in the initial stages of a pure paper standard the unit
of paper money is probably without exception valued in international
exchange at a lower figure than the same nominal amount of metal, be-
cause this step always results from inability to pay, the subsequent de-
velopment depends, as in the cases of Austria and Russia, on the
development of the balance of payments which determines the foreign
demand for domestic means of payment, on the amount of paper money
issued, and on the degree of success with which the issuing authority is

I 7 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

able to obtain an adequate supply of international means of payment.
These three factors can (and in fact at times did) shape up in such a
way that the exchange rate against the international means of payment
— in this case: gold— of the paper money is increasingly stabilized or
even rises, while at the same time the earlier standard metal falls in
price relative to the international standard. In the case of silver, this
happened (vis-a-vis gold) because of the increased and cheapened pro-
duction of the metal and because of its progressive demonetization. A
true independent paper standard exists in the case where there is no
longer any prospect of effective resumption of redemption in terms of
metal at the former rate.

35. The Formal and Substantive Validity of Money

It is true that by law and administrative action a state can today
insure the formal validity of a type of money as the standard in its own
area of power, provided it remains itself in a position to make payments
in this money.

It will not remain in s position to do this if it has allowed what was
previously an accessory or provisional type of money to become free
market money (in the case of a metallic money) or autonomous paper
money (in the case of note money). This is because these types of money
will then accumulate in the hands of the government until it commands
no other kind and is hence forced to impose them in its own payments.
(Knapp has rightly maintained that this is the normal process in the
case of "obstruct ional" changes in the standard.)

But naturally this formal power implies nothing as to the substantive
validity of money; that is, the rate at which it will be accepted in ex-
change for commodities. Nor does it yield any knowledge of whether and
to what extent the monetary authorities can influence its substantive
validity. Experience shows that it is possible for the political authority
to attain, by such measures as the rationing of consumption, the control
of production, and the enforcement of maximum or minimum prices, a
high degree of control of this substantive validity, at least with respect
to goods or services which are present or produced within its own terri-
tory. It is equally demonstrable from experience, however, that there are
exceedingly important limits to the effectiveness of this kind of control,
which will be discussed elsewhere. But in any case, such measures
obviously do not belong in the category of monetary administration. The
rational type of modern monetary policy has, on the contrary, had quite
a different aim. The tendency has been to attempt to influence the sub-
stantive valuation of domestic currency in terms of foreign currency,

35 ] The formal and Substantive Validity of Money i 7 9

that is, the market price of the home currency ^ expressed in units of
foreign currencies, usually to maintain stability or in some cases to attain
the highest possible ratio.- Among the interests determining such policy
are those of prestige and political power. But on the economic side, the
decisive ones are financial interest, with particular reference to future
foreign loans, and other very powerful business interests, notably of im-
porters and of industries which have to use raw materials from abroad.
Finally, the interests as consumers of those elements in the population
which purchase imported goods are involved. Today there can be no
doubt that "lytric" policy is in fact primarily concerned with regulation
of the foreign exchanges.

Both this and what follows are closely in agreement with Knapp.
Both in its form and content, his book is one of the greatest master-
pieces of German literary style and scientific acumen. It is unfortunate
that most of the specialist critics have concentrated on the problems
which he deliberately ignored — a small number indeed (although in
some cases not altogether unimportant).

While England probably still came into the gold standard somewhat
reluctandy, because silver, which was desired as the official standard, was
undervalued by the official ratio, all the other states in the modern world
with a modern form of organization have chosen their monetary standard
with a view to the most stable possible exchange relation with the
English gold standard. They chose either a pure gold standard, a gold
standard with restricted accessory silver monfey, or a restricted silver or
regulated note standard with a lytric policy concerned primarily with the
maintenance of gold reserves for international payments. The adoption
of pure paper standards has always been a result of political catastrophe,
wherever this has been the only way to meet the problem of inability to
pay in what was previously the standard money. This is happening on a
large scale today.**

It seems to be true that for the purpose of stabilizing foreign ex-
change in relation to gold, the free coinage of fixed rates of gold in one's
own monetary system is not the only possible means. The parity of ex-
change between different types of hylodromic chartal gold coinage can
in fact become seriously disturbed, although it is true that the possibility
of obtaining international means of payment in case of need by means
of exporting and recoining gold is always greatly improved by internal
hylodromy and can be temporarily negated only through natural ob-
stacles to trade or embargoes on the export of gold as long as this
hylodromy exists. But on the other hand it is also true, as experience
shows, that under normal peace-time conditions it is quite possible for

I 8 O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ 01. 11

an area with a well-ordered legal system, favorable conditions of produc-
tion and a lytric policy which is deliberately oriented to procuring
adequate foreign exchange for international payments, to maintain a
relatively stable exchange rate. Yet, if other things are equal, this in-
volves markedly higher burdens to state finances and to persons in need
of gold, Exacdy the same would be true, of course, if silver were the
principal means of payment in international transactions and were rec-
ognized as such in the principal trading nations of the world.

$6. Methods and Aims of Monetary Policy

^anong the more elementary of the typical methods (specific measures
will not in general be dealt with here) of lytric policy in relation to
foreign exchange are the following:

(a) In countries with gold hylodromy, (i) The backing of the cir-
culating medium, so far as it is not covered by gold, with commercial
paper; that is, claims to payments for goods which have been sold, which
are guaranteed by safe persons or, in other words, proved entrepreneurs.
The transactions of the note issuing banks on their own account are as
far as possible limited to dealing with such bills, to making loans on
the security of stocks of goods, to the receipt of deposits, the clearing of
check payments, and, finally, acting as financial agent for the state;
(2) the "discount policy" of the banks of issue. This consists in raising
the rate of interest charged on bills discounted when there is a probability
that payments abroad will create a demand for gold sufficient to threaten
the internal stock of gold, especially that in the hands of the issuing
bank. The purpose is to encourage owners of foreign balances to take
advantage of the higher rate of interest and to discourage domestic
borrowing.

(b) In areas with a resected metal standard other than gold or with
a paper standard, the following are the principal measures : ( i ) Discount
policy similar to that described under (a-.2) in order to check undue
expansion of credit; (2) a gold-premium policy. This is a measure which
is also common in gold-standard areas with an accessory restricted silver
currency; (3) a deliberate policy of gold purchases and deliberate control
of the foreign exchange rale by purchase and sale of foreign bills.

This policy is in the first instance oriented purely to lytric considera-
tions, but under certain circumstances it may come to involve substan-
tive regulation of economic activity. The note-issuing banks occupy a
position of great power in lW system of commercial banks, since the.
latter are often dependent on the credit extended by the bank of issue.

36 ] - Methods and Aims vA t/i--ir-..-.utry Policy

: T

The bank of issue may influence the other banks to regulate the moisey
market, that is, the conditions on whidi SiK*Herm credit is given, in a
uniform way, and from there proceed to a deliberate regulation of busi-
ness credit, thereby influencing the directioa of the productidn of goods.
This is, within the framework of a capitalistic economic order, the closest
approach to a planned economy. It is formally merely a matter of volun-
tary adjustments, but actually involves substantive regulation of eco-
nomic activity within the territory controlled by the political authority in
question.

These measures were all typical before the war. They were used in
the interest of a monetary policy which was primarily oriented to the
stabilization of a currency or, in case changes were desired, as in coun-
tries with restricted or paper money, at most to attempts to bring about
a gradual rise in the foreign exchange value of the currency. It was, thus,
in the last analysis, oriented to the hylodromic monetary systems of the
most importar t trading nations.

But strong interests exist which desire just the reverse policy. They
favor a lytric policy of the following type: (1) Measures which would
lead to a fall in the foreign exchange price of their own money in order
to improve the position of exporting interests; (2) by increasing the
issue of money through free coinage of silver in addition to gold (which
would have meant instead of it), and even in some cases deliberate issue
of paper money, to decrease the value of money in relation to domestic
goods and thereby, what is the same thing, to raise the money prices of
domestic goods. The object has been to improve prospects for profit in
the production of such goods, an increase in the price of which as
reckoned in terms of domestic currency was thought to be the first con-
sequence of the increase of the amount of domestic money in circulation
and of the attendant fall in its foreign exchange value. The intended
process is termed "inflation."

The following points may be noted: (1) though its quantitative
importance is still controversial, it is very probable that with any type of
hylodromy a very great cheapening in the production of the precious
metal or other source of increase in its supply, as through very cheap
forced seizures, will lead to a noticeable tendency toward a rise in the
prices at least of many products in areas where that metal is the monetary
standard, and in differing degrees of all products. (2) It is at the same
time an undoubted fact that, in areas with an independent paper stand-
ard, situations of severe financial pressure, especially "war, lead the
monetary authorities to orient their policy overwhelmingly to the
financial requirements of the war. It is equally cle^r that countries with
hylodromy or with restricted metallic money have, in similar circum-

I 8 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. If

stances, not only suspended redemption of their notes in circulation, but
have gone further to establish a definitive and pure paper standard. But
in the latter case, the metal money, now become accessory money, could,
because its premium in relation to notes is ignored, only be used for non-
monetary purposes. It thus disappeared from circulation. Finally, it is a
fact that in cases of such shifts to a pure paper standard, occurring along
with unlimited issue of paper money, inflation has in fact ensued with
all its consequences on a colossal scale.

When all these processes are compared, it will be seen that so long
as freely coined market money exists, the possibility of inflation will be
narrowly limited. This will be true in the first place for mechanical"
reasons: though it is somewhat elastic, the quantity of the precious metal
in question available for ■ monetary use is ultimately firmly limited.
Secondly, there are economic reasons in that here the creation of money
takes place on the initiative of private interests, so that the demand for
coinage is oriented to the needs of the market system for means of pay-
ment. Inflation, then, is only possible if restricted metal money (such as
today silver in gold-standard countries) is thrown open to free coinage.
However, if the restricted metal can be produced very cheaply and in
large quantities, the effect may be very great

Inflation through an increase in the quantity of "means of circula-
tion" is conceivable only as the result of a very gradual increase in the
circulation through a lengthening of credit terms. The limits are elastic,
but in the last resort this process is stricdy limited by the necessity for
maintaining the solvency of the note-issuing bank. There is acute danger
of inflation only if there is danger that the bank will become insolvent.
Normally this is likely to occur only where there is a paper standard
resulting from war needs. (Cases like the gold inflation of Sweden dur-
ing the war, resulting from the export of war materials, are the result of
such special circumstances that they need not be considered here.)

Where an independent paper standard has once been established,
there may not be any greater danger of inflation itself (since in time of
war-^almost all countries soon go over to a paper standard), but in general
there is a noticeably greater possibility of the development of the conse-
quences of inflation. The pressure"^ financial difficulties and of the
increased wage and salary demands and other costs which are caused by
the higher prices will noticeably strengthen the tendency of financial
administrations to continue the inflation even if there is no absolute
necessity to do so and in «pite of the possibility to suppress it if strong
sacrifices are" incurred. The differences in this respect between paper
currency and other currencies is, even if only quantitative, certainly
noticeable, as the financial conduct [during and after the War] of the

36 ] Methods and Aims of Monetary Policy 1 8 3

Allies as a group, of Germany, and of both Austria and Russia finally,
can show.

Lytric policy may thus, especially in the case of accessory restricted
metal or of paper money, be an inflationary policy. In a country which,
like the United States, has had relatively so little interest in the foreign
exchange value of her money, this has been true for a time under quite
normal conditions without being based on any motives derived from
financial needs of the state. In a number of countries which fell into
inflationary measures during the War, the pressure of necessity has been
such as to lead to the continuance of an inflationary policy afterwards.

This is not the place to develop a theory of inflation. Inflation always
means, in the first place, a particular way of increasing the purchasing
power of certain interests. We will only note that any lytric policy
oriented to the substantive rationality of a planned economy, which it
would seem to be far easier to develop with administrative and especially
paper money, is at the same time far more likely to come to serve interests
which, from the point of view of exchange rate stabilization, are irra-
'tional. For formal rationality (of the market-economy type) of lytric
policy, and hence of the monetary system, can, in conformity with the
definition of "rationality" consistently held to here, only mean: the
exclusion of all such interests which are either not market-oriented, like
the financial interests of the state, or are not interested in the mainte-
nance of stable exchange relations with other currencies as an optimum
basis for rational calculation, but which, on the contrary, are primarily
oriented to the creation of purchasing power for certain interest groups
by means of inflation and to its maintenance even if there is no longer
any iieed for the issue of new money from the point of view of public
finances. Whether especially this latter process is to be praised or cen-
sured is, naturally, not a. question capable of solution en empirical
grounds. Of its empirical existence there can be no doubt-

It is furthermore true that proponents of a point of view which is
oriented to substantive social ideals can find a very important opening
for criticism in the very fact that the creation of money and currency is,
in a pure market economy, made an object of the play of interests
oriented only to profitability, and is not considered in terms of the
"right" volume or the "right" type of money. They might with reason
argue that it is only administrative money which can be "managed," but
not market money. Thus the use of administrative money, especially
paper money, which can be cheaply produced in any desired form and
quantity is, from the point of view of a substantive rationality, whatever
its goals, the only correct way to handle the monetary question. This
argument is conclusive in formal logical terms. Its value, however, is

: 8 4 SOCIOLOGICAL categories o> S-CCJVGMIC ACTION [ Ck. II

naturally limited in view of the fact ths- in the future as in the past it
will be the "interest's" of individuals rather than the "ideas" of an eco-
nomic administration which will rule the world.* 9 Thus, the possibility
of conflict between formal rationality in the present sense and the
substantive rationality which could theoretically be constructed for a
lytric authority sntiieiy free of any obligation to maintain hylodromy of
a metal, has besn demonstrated also for this point. That was the sole
purpose of this discussion.

It is evident that this whole treatment of money consists only in a
kind of discussion with Knapp's magnificent book, Die Staatlkke The-
orie des Geldes, a discussion which is, however, confined to points rele-
vant teethe present problems and carried out on a highly schematic basis,
entirely neglecting the finer points. Quite at variance with its author's
intentions, though perhaps not entirely without fault on his part, the
work immediately was utilized in support of value judgments. It was
naturally greeted with especial warmth by the Austrian lytric adminis-
tration, with its partiality to paper money. Events have by no meins dis-
proved Knapp's theory in any point, chough they have shown, what was
known beforehand, that it is incomplete in its treatment of the sub-
stantive validity of money. It will now he necessary to justify this state-
ment in more detail'.

36a. Excursus: A Critical Note on the "State Theory
of Money"

Knapp victoriously demonstrates that in every case the recent mone-
tary policy both of stares themselves and of agencies under the direction
of the state have, in their efforts to adopt a gold standard or some other
standard approximating this as closely as possible, been primarily con-
cerned with the exchange value of their currency in terms of others,
particularly the English. The object has been to maintain a certain
exchange parity with the English gold standard, the money of the world's
largest trading area which was universally used as a means of payment
in international trade. To accomplish this, Germany first demonetized
silver; then France, Switzerland, and the other countries cf the Latin
Union, Holland, and finally India ceased to treat silver as market money
and made it into restricted money. Apart from this they undertook in-
directly gold-hylodromic measures to provide for foreign payments in
gold. Austria and Russia did the same, in that the lytric administration
of these countries using unredeemable, independent paper money took
indirectly gold-hylodromic measures so as to be in a position to make at

i6a ] Excursus on Knopf's "State Theory of Money" i 8 5

least foreign payments in gold at any time. They were thus concerned
entirely with obtaining the greatest possible stability of their foreign
exchange rates. Knapp concludes from this that stabilization of the
foreign exchange rate is the only factor which makes the particular
monetary material and hylodromy at all significant He concludes that
this end of foreign exchange rate stability is served just as well by the
indirectly hylodromic measures of the paper currency administrations (as
in Austria and Russia) as by direcdy hylodromic measures. His claim is
not, to be sure, stricdy and literally true under ceteris paribus conditions
for areas of full hylodromy in the same metal. For, as long as two areas
which maintain a hylodromic coinage in the same metal refrain from
embargoes on the exportation of the monetary metal, whether they are
both gold-standard or silver-standard countries, the fact of the existence
of the same hylodromy on both sides undoubtedly facilitates the mainte-
nance of exchange parity considerably. Yet, under normal conditions
Knapp's conclusion is to a large extent correct. But this does not prove
t that in the choice of a monetary material — above all today in the choice
between a metal, whether gold or silver, and note money — this would
be the only set of considerations which could be important. (The special
circumstances which are involved in bimetallism and restricted money
have already been discussed and can reasonably be left aside here.)

Such a claim would imply that a paper standard and a metallic stand-
ard behave in all other respects in the same way. But even from a formal
point of view the difference is significant. Paper money is necessarily a
form of administrative money, which may be true of metallic money,
but is not necessarily so. It is impossible for paper money to be "freely
coined." The difference between depreciated paper money, such as the
assignats, and the type of depreciation of silver which might at some
future time result from its universal demonetization, making it ex-
clusively an industrial raw material, is not negligible; it is true, however,
that Knapp occasionally grants this. Paper has been and is today (1920)
by no means a freely available good, just as the precious metals are not.
But the difference, both in the objective possibility of increased produc-
tion and in the costs of production in relation to probable demand, is
enormous, since the production of metals is to a relative degree so defi-
nitely dependent on the existence of mineral deposits. This difference
justifies the proposition that a lytric administration was, before the war,
in a position to produce paper money, if it so desired, in unlimited
quantities. This is a significant difference even from copper, as used in
China, certainly from silver, and very decidedly from gold. The costs
would be, relatively speaking, negligible. Furthermore, the nominal
value of the notes could be determined arbitrarily and need bear no

I 8 6 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ch. II

particular relation to the amount of paper used. In the case of metallic
money, this last has been true only of its use as "change" money; thus
not in any comparable degree or sense. It was certainly not true of cur-
rency metal. In the latter case, the available quantity was indeed some-
what elastic, but nevertheless immensely more rigidly limited than the
produceability of paper. This fact has imposed limits on the arbitrariness
of monetary policy. It is of course true that, so far as the lytric administra-
tion has been oriented exclusively to the maintenance of the greatest
possible stability of foreign exchange rates, it would be subject to very
definite normative limitations on its creation of note money, even though
not to technical limitations. This is the answer Knapp might well give,
and in giving it he would be right, although only from a formal point of
view. And how about fully "independent" paper money? The situation
is the same, Knapp would say, pointing to Austria and Russia: "only"
the purely technical limitations imposed by the scarcity of monetary
metals are absent. The question is, whether this absence is an altogether
unimportant difference — a question which Knapp ignores. "Against"
death," he might say, meaning that of a currency, "no potion has yet
been found." If the present (1920) absolute and abnormal obstruction
of paper production he ignored, there unquestionably have been and still
are certain factors tending to unlimited issue of paper money. In the
first place, there are the interests of those in political authority who, as
Knapp also assumes, bear ultimate responsibility for monetary policy,
and there are also certain private interests. Both are not of necessity
primarily concerned with the maintenance of stable foreign exchange
rates. It is even true, at least temporarily, that their interests might lie in
the directly opposite direction. These interests can, either from within
the political and monetary administration or by exercising a strong pres-
sure on it, have an important influence on policy which would lead to
"inflation" or what Knapp, who stricdy avoids the term, could only
describe as a case of the issue of paper money which is not "admissible"
because it is not oriented to the international rate of exchange.

There are, in the first place, financial temptations to resort to infla-
tion. An average depreciation. of the German mark by inflation to i/2oth
of its former value in relation to the most important domestic com-
modities and property objects would — once profits and wages had be-
come adapted to this level of prices — mean, it may here be assumed, that
all internal commodities and labor services would nominally he valued
20 times as high as before. This would further mean, for those in this
fortunate situation, a reduction of the war debt to i/2cth of its original
level. The state, which would receive a proportionate increase in its in-
come from taxation as nominal money incomes rose, would at least enjoy

36a ] Excursus on Knapp's "State Theory, of Mvney" i 8 7

important relief from this source. This is indeed an attractive prospect.
It is clear that someone would have to hear the costs, but it would be
neither the state nor one of these two categories of private individuals,
entrepreneurs and wage earners. The prospect is even more attractive
of being able to pay old foreign debts in a monetary unit which can be
manufactured at will and at negligible cost. Apart from the possibility
of political intervention, there is of course the objection that the use of
this policy toward foreign loans would endanger future credit. But the
state is often more concerned with the present than with the more or
less remote future. Furthermore, there are entrepreneurs who would
be only too glad to see the prices of their products increased twenty-fold
through inflation if, as is altogether possible, the nominal wages of
workers, because of lack of bargaining power or through lack of under-
standing of the situation or for any other reason, were to increase "only"
five- or possibly ten-fold.

It is usual for acute inflation from public finance motives of this kind
to be sharply disapproved by experts in economic policy. It is certainly
not compatible with Knapp's form of exchange-rate oriented monetary
policy. On the other hand, a deliberate but very gradual increase of the
volume of means of circulation, of the type which is sometimes under-
taken by central banks by facilitating the extension of credit, is often
looked upon favorably as a means of stimulating speculative attitudes.
By holding out prospect of greater profits, it is held to stimulate the spirit
of enterprise and with that an increase in capitalistic production by en-
couraging the investment of free money in profit-making enterprise
rather than its investment in fixed-interest securities.- We have to ask,
however, what is the effect of this more conservative policy on the
stability of the exchange rate? Its direct effect — that is, the consequence^
of the stimulation of the spirit of enterprise — may be to create 3 mojjl
favorable balance of payment, or at least to check the fall in the foreign
exchange position of the domestic currency. How often this works out
and how strong the influence is, is, of course, another question. Also, no
attempt will here be made to discuss whether the effects of a modera^
increase in the volume of currency caused by state requirements for
money would be similar. The costs of such an expansion of the stock of
currency money, which would be relatively harmless to the foreign ex-
change position, would be gradually paid by the same groups which
would be subject to "confiscation" in a case of acute inflation. This in-
cludes all those whose nominal income remains the same or who have
securities with a constant nominal value, above all, the receivers of
fixed-interest bond income, and those who eam salaries which are
"fixed" in that they can be raised only through a severe struggle. It is

I 8 8 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Clt. II

thus not possible to interpret Knapp as meaning that it is only the sta-
bility of foreign exchange which is significant as a criterion for the
management of paper money; indeed, he does not claim this. Nor is it
legitimate to believe, as he does, that there is a very high probability that
this will empirically be the only criterion. It cannot, however, be denied
that it would indeed be the decisive criterion of a lytric policy which is
completely rational in Knapp's sense, that is, one which seeks as far as
possible to prevent disturbances of the price relations resulting from
monetary policies (a definition which Knapp does hot himself spell out).
But it cannot be admitted, and Knapp does not claim this either, that
the practical significance of the kind of monetary policy formulated is
limited to the question of the stability of foreign exchange rates.

Inflation has here been spoken of as a source of price revolutions or
at least slow price level increases, and it has been pointed out that it may
be caused by the desire to bring about such price level changes. Natu-
rally, an inflation so extensive as to create a price revolution will inevita-
bly upset the stability of foreign exchange; though this is by no means
necessarily true of gradual increases in the circulating medium. Knapp
would admit that. He obviously assumes, and rightly, that there is no
place in his theory for* a currency policy concerned with commodity
prices, whether it be revolutionary, evolutionary, or conservative. Why
does he do this? Presumably for the following formal reasons:

The exchange relationship between the standards of two or more
countries is expressed daily in a small number of formally unambiguous
and uniform market prices of currencies, which can be used as a guide
to a rational lytric policy. It is further possible for a lytric authority,
especially one concerned with the means of circulation, to make certain
estimates (but only estimates, based on anterior demand conditions
periodically observed in the market) of the probable fluctuations of a
given stock of means of payment which will be required, for payment
purposes alone, by a given population linked in market relationships over
a certain future period, provided conditions in general remain approxi-
mately unchanged. But it is not possible to estimate in the same sense,
quantitatively, the effect on prices — revolutionary or gradual increase, or
perhaps a decrease — of a currency expansion or contraction over a cer-
tain future period. To do thisj ii would, in the case of inflation, to which
attention will be confined, be necessary to know the following additional
facts: (i) The existing distribution of income; (2) connected with this,
the present policy conclusions derived therefrom of the different indi-
viduals engaged in economic activity; (3) the channels the inflationary
process would follow, that is, who would be the primary and subsequent
recipients of newly-issued money. This would involve knowing the se-

2,6a ] Excursus on Knapp's "State Theory of Money' 7 189

quence in which nominal incomes are raised by the inflation and the
extent to which this would take place; (4) the way in which the newly-
created demand for goods would be exercised, for consumption, for
building up property investments, or for new capital. This would be
important quantitatively, but even more so qualitatively; (5) the direc-
tion of the consequent changes in prices and of the further income
changes resulting in turn, and all the innumerable further attendant
phenomena of purchasing power redistribution, and also the volume of
the (possible) stimulated increase in goods production. All these are data
which would depend entirely on the decisions made by individuals when
faced with the new economic situation. And these decisions would in
ttim react on the expectations as to prices of other individuals; only the
consequent struggle of interests can determine the actual future prices.
In such a situation there can clearly be no question of forecasting in the
form of such predictions as that the issue of an additional billion of cur-
rency units would result in increases in the pig-iron price of "X" or in
the grain price of "Y." The prospect is made even more difficult by the
fact that it is possible temporarily to establish effective price regulation
of domestic commodities, even though these can only be maximum and
not minimum prices and their effectiveness is definitely limited. But
even if this impossible task of calculating specific prices were accom-
plished, it would be of relatively little use. This would only determine
the amount of money required as a means of payment, but in addition to
this, and on a much larger scale, money would be required in the form
of credit as a means of obtaining capital goods. Here, possible conse-
quences of a proposed inflationary measure are involved which are in-
accessible to any kind of accurate forecasting. It is thus understandable
that, all things considered, Knapp should have entirely neglected the
possibility of inflationary price policies being used in the modem market
economy as a deliberate rational policy comparable to that of mainte-
nance of foreign exchange stability.

But historically the existence of such policies is a fact. To be sure,
in a crude form and under much more primitive conditions of money
economy, inflation and deflation have been repeatedly attempted with
the Chinese copper currency, though they have led to serious failures.
In America, inflation has been proposed. Knapp, however, since his book
operates on the basis only of what he calls demonstrable assumptions,
contents himself with giving the advice that the state ought to be careful
in the issue of independent paper money. Since he is entirely oriented
to the criterion of exchange rate stability, this advice appears to be rela-
tively unequivocal; inflationary debasement and depreciation in foreign
exchange are usually very closely associated. But they are not identical,

19 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

and it is far from true that every inflation is primarily caused by the
foreign exchange situation. Knapp does not explicitly admit, but neither
does he deny, that an inflationary money regime has been urged for
reasons of price policy among others by the American silver producers
during the free silver campaign and by the farmers who demanded
"greenbacks," but not only in these cases. It is probably comforting to
V him that it has never been successful over a long period.

But the situation is by no means so simple as this. Whether or not
they have been intended simply to raise the price level, inflations of this
sort have in fact often taken place; and even in the Far East, to say
nothing of Europe, such catastrophes as met the asstgnats are by no
means unknown. This is a fact which a substantive theory of money
must deal with. Knapp? of all people, certainly would not maintain that
there is no difference whatever between the depreciation of silver and
the depreciation of the asstgnats- Even formally this is not the case.
What has been depreciated is not silver coin, but, on the contrary, the
raw silver for industrial purposes. Coined chartaJ silver, on the con-
trary, being restricted, has often had the opposite fate. On the other
hand, it was not the paper available for industrial purposes which was
"depreciated," but only the chartal asstgnats It is true, as Knapp would
rightly point out, that they would fall to zero or to their values to col-
lectors or as museum pieces only when they had finally been repudiated
by the state. Thus even this results from a "state" action- This may be
granted, but their material value may have fallen to a minute proportion
of what it formerly was, before their formal repudiation, in spite of the
fact that they were still nominally valid for making payments of public
obligations.

But quite apart from such catastrophes, history provides a consider-
able number of examples of inflation, and, on the other hand, in China,
of deflationary movements as a result of non-monetary use of monetary
metals. It is necessary to do more than merely to note that under some
circumstances certain kinds of money which were not accessory before,
have become so, have tended to accumulate in the hands of the state,
and have rendered obstructional changes in the standard necessary. A
substantive theory of money should at least formulate the question as to
how prices and income, and hence the whole economic system, are in-
fluenced in such cases, even though it is, for the reasons which have
been given, perhaps questionable how far it will be able to achieve a
theoretical solution. Similarly, a problem is suggested by the fact that, as
a result of relative decline in the prices of either silver or gold in terms
of the other, France, which has been formally a country of bimetallism,
in fact has operated at rimes on a gold standard alone, and at others on

2,6a } Excursus on Knapp's "State Theory of Money" i 9 1

a silver standard, while the other metal became accessory- In such a case
it is not sufficient merely to call attention to the fact that the resulting
price changes originate from a monetary source. The same is true in
other cases where the monetary material has been changed. We also
want to know what are the sources of an increase in the supply of a
precious metal, whether it has stemmed from booty (as in the case of
Cortez and Pizano), from enrichment through trade (as in China early
in the Christian era and since the sixteenth century), or from an increase
of production. So far as the latter is the source, has production merely
increased, or has it also become cheaper, and why? What is the part
which may have been played by changes in the non-monetary uses of
the metal? It may be that for a particular economic area, as, for instance,
the Mediterranean area in Antiquity, a definitive exporthas taken place
to an entirely distinct area like China or India, as happened in the early
centuries of, the Christian era. Or the reasons may lie wholly or partly
in a change in. the monetary demand arising from changes in customs
touching the use of money, such as use in small transactions. How all
these and various other possibilities tend to affect the situation is a sub-
ject which ought to be discussed in a monetary theory.

Finally, it. is necessary to discuss the regulation of the "demand" for
money in a market economy, and to inquire into the meaning of this
concept. One thing is clear, that it is the actual demand for means of
payment on the part of the parties to market relationships which deter-
mines the creation of free market money under free coinage. Further-
more, it is the effective demand for means of payment and, above all,
for credit, on the part of market participants, in combination with care
for the solvency of the banks of issue and the norms which have been
established with this in view, which determines the policies for means
of circulation of modern banks of issue. All this is oriented to the re-
quirements of interested parties, as is in conformity with the general
character of the modern economic order.

It is only this which, under the formal legal conditions of our
economic system, can correcdy be called "demand for money." This
concept is thus quite indifferent with respect to substantive criteria, as
is the related one of effective demand for goods. In a market economy
there is an inherent limit to the creation of money only in the case of
metallic money. But it is precisely the existence of this limit, as has
already been pointed out, which constitutes the significance of the pre-
cious metals for monetary systems. The restriction of standard money to
a material which is not capable of unlimited production at will, par-
ticularly to one of the precious metals, in combination with the "cover-
age" of means of circulation by this standard, sets a limit to any sort of

I$2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. H

creation of money. Even though it does not exclude a certain elasticity
and does not make an evolutionary type of credit inflation altogether
impossible, it still has a significant degree of rigidity. Where money is
made out of a material which is, for practical purposes, capable of un-
limited production, like paper, there is no such mechanical limit. In this
case, there is no doubt that it is the free decision of the political authori-
ties which is the regulator of the quantity of money, unimpeded by
any such mechanical restraints. That, however, means, as has been
indicated, determination by their conception of the financial interests of
the political authority or even, under certain circumstances, the purely
personal interests of the members of the administrative staff, as was true
of the use of the printing presses by the Red armies. The significance
of metallic standards today lies precisely in the elimination of these inter-
ests from influence on the monetary situation, or more precisely, since
they may always try to influence the state, urging it to abandon metal in
favor of a pure paper standard, in a certain restraint on such interests. In
spite of the mechanical character of its operation, a metallic standard
nevertheless makes possible a higher degree of formal rationality in a
market economy because it permits action to be oriented wholly to
market advantages. It is, of course, true, as demonstrated by the experi-
ence of Austria and Russia, that the monetary policy of lytric authorities
under a pure paper standard is not necessarily oriented either to the
purely personal interests of the authority or the administrative staff, or
to the financial interests of the state (which would mean the least ex-
pensive creation of the greatest possible volume of means of payment,
without concern for what happens to the currency as a means of
exchange). But the danger that such an orientation should become
dominant is, nonetheless, continually present under a paper standard,
while in a hylodromic system (free market money) it does not exist in a
comparable sense. From the point of view of the formal order of a
market economy, the existence of this danger is an "irrationar factor
present in any form of monetary system other than a hylodromic stand-
ard. This is true in spite of the fact that it may be readily admitted that,
on account of its mechanical character, such a monetary system itself
possesses only a relative degree of formal rationality. So much Knapp
Could and should admit.

However incredibly primitive the older forms of the quantity theory
of money were, there is no denying that any inflation with the issue of
paper money determined by financial needs of the state is in danger of
causing "debasement" of the currency. Nobody, not even Knapp, would
deny this- But his reasons for dismissing it as unimportant are thoroughly
unconvincing. The "amphitropie" position of each individual, meaning

36a ] Excursus on Knapp's "State Theory of Money" 1 9 3

that every man is both a debtor and creditor, which Knapp in all seri-
ousness puts forward as proof of the absolute indifference of any cur-
rency "debasement," 60 is, as we now all know from personal experience,
a mei£ phantom. What becomes of this position, not only for the rentier,
but also for every one on a fixed salary, whose income remains constant
in nominal units or, at best, is doubled if state finances and the mood
of the bureaucracies permit, while bis expenditures may, in nominal
units, have increased twenty-fold, as it happens to us nowadays> What
becomes of it for any long-term creditor? Such radical alterations in the
(substantive) validity of money today produce a chronic tendency
toward social revolution, even if many entrepreneurs are in a position
to profit from the international exchange situation, and if some (very
few) workers are powerful enough to secure increases in their nominal
wages. It is, of course, open to anyone to welcome this revolutionary
effect and the accompanying tremendous unsettlement of the market
economy. Such an opinion cannot be scientifically refuted. Rightly or
wrongly, some can hope that this tendency will lead to the transforma-
tion of a market economy into socialism. Or some may expect proof for
the thesis that only a regulated economy with small-scale production
units is capable of substantive rationality, regardless of the sacrifices its
establishment would entajl. It is impossible for science to decide such
questions, but at the same 1 time it is its duty to state the facts about these
effects as clearly and objectively as possible. Knapp's assumption that
people are both debtors and creditors in the same degree, which in the
generalized form he gives the proposition is quite untenable, serves only
to obscure the situation. There ate particular errors in his work, but the
above seems to be the most important element of incompleteness in his
theory. It is this which has led also some scholars who otherwise would
have no reason to be hosrile *o his work, to attack his theory on grounds
of "principle."

37. The Non-Monetary Significance of Political Bodies
for the Economic Order

The significance for the economic system apart from the monetary
order of the fact that autonomous political organizations exist lies above
all in the following aspects:

CO In the fact that, other things being nearly equal, they tend to
prefer their own subjects as sources of supply for the utilities they need.
The impact of this fact is the greater, the more the economy of these

I 9 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. U ;

political bodies has a monopolistic character or that of a system of budget-
ary satisfaction of needs; hence it is presently on the increase.

(2) In the possibility deliberately to encourage, restrain, or regulate
trade transactions across its boundaries on the basis of some substantive
criteria—that is, to conduct a foreign trade policy.

(3) In the possibility of various types of formal and substantive
regulation of economic activity by political bodies, differing in stringency
and in type.

(4) In the important consequences of the very great differences in
the structure of authority and of political power and in the closely re-
lated structure of administration and of social classes, especially of those
which enjoy the highest prestige, and of the attitudes toward earning
and profit-making which derive from these.

(5) In the competition among the directing authorities of these
political bodies to increase their own power and to provide the members
under their authority, with means of consumption and acquisition and
with the corresponding opportunities for earnings and profits.

(6) In the differences in ways in which these bodies provide for
their own needs. On this see the following section.

38. The Financingof Political Bodies

The most direct connection between the economic system and pri-
marily non-economic organizations lies in the way in which they secure
the means of carrying on their corporate activity as such; "that is, the
activity of the administrative staff itself and that which is directed by it
(see chap. I, sec. 12), This mode of provision may be called "financing"
in the broadest sense, which includes the provision of goods in kind.

Financing; — that is, the provision of corporate activity with" eco-
nomically scarce means — may, considering only the simplest types, be
organized in the following ways:

(O Intermittendy, based either on purely voluntary or on compul-
sory contributions or services. Voluntary "intermittent" financing may
take one of three forms :

(a) That of large gifts or endowments.* 1 This is typical in relation
to charitable, scientific, and other ends which are primarily neither
economic nor political.

(b) That of begging. This is typical of certain kinds of ascetic com-
munities.

In India, however, we also find secular castes of beggars, and else-
where, particularly in China, organized groups of beggars -are found.

38 ] The Financing of Political Bodies i 9 5

Begging may in these cases be extensively monopolized and systematized
with territorial assignments. Also, because response is regarded as a duty
or as meritorious, begging may lose its intermittent character and in fact
tend to become a tax-like source of income.

(c) That of gifts, which are formally voluntary, to persons recog-
nized as politically or socially superior. This includes gifts to chiefs,
princes, patrons, feudal lords over land or persons. "Because of the fact
that they have become conventional, these may in fact be closely ap-
proximated to compulsory payments. But usually, they are not worked
out on a basis of rational expediency, but are generally made on certain
traditional occasions, such as particular anniversaries or on the occasion
of events of family or political significance.

Intermittent financing may, on the other hand, be based on compul-
sory contributions.

The type case for compulsory "intermittent" financing is furnished
by such organizations as the Camorra in southern Italy and the Mafia in
Sicily, and similar organized groups elsewhere. In India there have ex-
isted rituall y separated castes of "thieves" and "robbers," and in China
sects and secret societies with a similar method of economic provision.
The payments are "intermittent" only on the surface, because they are
formally illegal. In practice they often assume the character of periodic
"subscriptions," paid in exchange for the rendering of certain services—
notably, of a guarantee of security. About twenty years ago, a Neapoli-
tan manufacturer replied to my doubts concerning the effectiveness of
the Camorra with respect to business enterprises: "Signore, la Camorra
mi prende X lire nel mese, ma garantisce la sicurezza, — lo Stato me ne
prende 10 • X, e garantisce: niente." [Sir, the Camorra takes X lire a
month from me, but guarantees me security; the state takes ten times
that amount, and guarantees me nothing.] The secret societies typical of
Africa — perhaps rudiments of the former "men's house" — operate in a
similar way (as secret courts), thus insuring security. Political groups
may, like the Ligurian "pirate state," rest primarily on the profits of
booty, but this has never been the exclusive source of support over a
'long period.

(2) Financing may, on the other hand, be organized on a perma-
nent basis.

A. — This may take place without any independent economic produc-
tion on the part of the organization. It may then consist in contributions
of goods, which may be based on a money economy. If so, money con-
tributions are collected and provisions are obtained by the money
purchase of the necessary utilities. In this case, all compensation of
members of the administrative staff takes the form of money salaries.
Contributions of goods may, on the other hand, be organized on the
basis of a natural economy. Then, members are assessed with specific

196 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11

contributions in kind. Within this category, there are the following sub-
types; the administrative staff may be provided for by benefices in kind
and the needs of the group met in the same way. On the other hand,
the contributions which were collected in kind may be sold wholly or
in part for money and provision made in monetary terms.

Whether in money or in kind, the principal elementary types of
contribution are the following:

(a) Taxes; that is, contributions which may be a proportion of all
possessions (in the money economy: of wealth), or of all receipts (in
the money economy: of incomes), or, finally, only of the means of
production or from certain kinds of profit-making enterprises (so-called
"yield taxes").

(b) Fees; that is, payments for using or taking advantage of facilities
provided by the organization, of its property or of its services.

(c) "Imposts" on such things as specific types of use or consumption
of commodities, specific kinds of transactions, above all, the transportation
of goods (customs) and the turn-over of goods (excise duties and sales
tax).

Contributions may be collected by the organization itself or leased
out ("fanned") or lent out or pledged. The leasing of collection for a
fixed sum of money ("tax farming") may have a rational effect on the
fiscal system since it may be the only possible way to budget accounts.
Lending and pledging are usually irrational from the fiscal point of
view, normally resulting from financial necessity or usurpation on the
part of the administrative staff, a result of the absence of a dependable
administrative organization .

A permanent appropriation of the receipts from contributions by
creditors of the state, by private guarantors of the army or of tax pay-
ments, by unpaid mercenary captains (conifctrieri) and soldiers, and,
finally, by holders of rights to official positions, will he called the grant-
ing of benefices (yeiffruv.dv.-ng). This may in turn take the form of
individual appropriation or collective appropriation with freedom of re-
placement from the group ivtiich has collectively cairi^d our tht* ap-
propriation.

Financing without any economic production en the part of the or-
ganization itself may also take place by die imposition of obligations 10
personal services; that is, direct personal services with specification °^
the work to be done.

B. — Permanent financing may further, contrary to the above cases,
£>e based on the existence of a productive establishment under the direct
control of the organization. Such an establishment may be a budgetary
unit, as an otkos or a feudal domain, or it may he a profit-making enter-

5,* j 77*e Financing &{ Political Bodies i 9 7

prise, which, an turn, may compete freely with other profit-making
enterprises or be ? monopoly.

Once more, exploitation may be directly under the administration of
■.he organisation or it may be farmed out, leased, or pledged.

C. — Finally, it is possible for financing to be organized "liturgically''
by means of burdens which are associated with privileges. These may
involve "positive privileges," as when a group is freed from the burden of
malting particular contributions, or (possibly identical with the former
case) "negative privileges," as when certain burdens are placed on par-
ticular groups. The latter are usually cither status groups (Stotide) or
property or income classes. Finally, the Jiturgic type may be organized
"ccrrelarivsiy" by associating specific monopolies with the burden of
performing certain services or supplying certain goods. This may take
the form of organisation of "estates," that is, of compulsorily forming the
members of the organization into hereditarily closed liturgical classes on
the basis of property and occupation, each enjoying status privileges.
Or it may be carried out capitalisn'cally, by creating closed guilds or
cartels, with monopolistic rights and a corresponding obligation to make
money contributions.

This very rough classification applies to all kinds of organizations.
Examples, however, will be given only in terms of political bodies.

The system of provision through money contributions without eco-
nomic production is typical of the modern state. It is, however, quite out
of the question to attempt here even a summary analysis of modem sys-
tems of taxation. What will first have to be discussed at length is the
"sociological location" of taxation — that is, the type of structure of domi-
nation that has typically led to the development of certain kinds of con-
tributions (as, e.g., fees, excises, or taxes).

Contributions in kind, even in the case of fees, customs, excises, and
sales taxes, were common throughout the Middle Ages. Their commuta-
tion into money payments is a relatively modem phenomenon.

Deliveries of goods in kind are typical in the form of tribute or of
assessments of products laid upon dependent economic units. The trans-
portation of in-kind contributions is possible only for small political units
or under exceptionally favorable transportation conditions, as were pro-
vided by the Nile and the Chinese Grand Canal. Otherwise it is neces-
sary for the contributions to be converted into money if the final recipi-
ent ts to benefit from them. This was common in Antiquity. It is also
possible for them to be exchanged, according to the distance they have
to be transported, into objects with higher price-to-weight ratios. This is
said to have been done in ancient China.

Examples of obligations to personal service are obligations to military
service, to serve in courts and on juries, to maintain roads and bridges,
to work on a dyke or in a mine, and all sorts of compulsory service for

I98 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. II

corporate purposes which are found in various types of organizations. The
type case is furnished by the "corvie state," of which the best example
is the New Kingdom of ancient Egypt. Similar conditions were found
at some periods in China, to a lesser extent in India and to a still less
extent in the late Roman Empire and in many organizations of the early
Middle Ages. Support by die granting of benefices is illustrated by the
following cases: (1) In China, collectively to the body of successful
examinees for official positions; (2) in India, to the private guarantors
of military services and tax payments; C3) to unpaid condottieri and
mercenary soldiers, as in the late Caliphate and under the regime of the
Mamelukes; (4) to creditors of the state, as in the sale of offices common
everywhere.

Provision from the organization's own productive establishment ad-
ministered on a budgetary basis is illustrated by the exploitation of do-
mains under direct control for the household of the king, and in the
obligation of subjects to compulsory services if used, as in Egypt, to
produce goods needed by the court or for political purposes in directly
controlled production establishments. Modem examples are factories
maintained by the state for the manufacture of munitions or of military
clothing.

The use of productive establishments for profit in free competition
with private enterprise is rare, but has occurred occasionally, as, for
instance, in the case of the [Prussian] Seefamdlung** On the other
hand, the monopolistic type is very common in all periods of history, but
reached its highest development in the Western World from the six-
teenth to the eighteenth centuries.

Positive privileges on a liturgical basis are illustrated by the exemp-
• tion of the literati in China from feudal obligations. There are similar
exemptions of privileged groups from the more menial tasks all over the
world. In many countries educated people have been exempt from mili-
tary service.

Negative privilege is to be found in the extra liturgical burdens
placed upon wealth in the democracies of Antiquity, It is also illustrated
by the burden placed on the classes who did not enjoy the exemptions
in the cases just mentioned.

To take the "correlative" case under (C.) above: the subjection of
privileged classes to specified liturgical obligations is the most important
form of systematic provision for public needs on a basis other than that
of regular taxation. In China, India, and Egypt, the countries with the
earliest development of "hydraulic" bureaucracy, liturgical organization
was based on obligations to deliveries and services in kind. It was in part
taken over from these sources by the Hellenistic states and by the late
Roman Empire, though there, to be sure, to an important extent it took
the form of liturgical obligations to pay money taxes rather than contri-
. butions in kind. This type of provision always involves the organization
of the population in terms of occupational] y differentiated classes. It is
by no means out of the question that it might reappear again in the
modem world in this form if public provision by taxation should fall

38 ] The Financing of Political Bodies i 9 9

down and tfie satisfaction of private wants by capitalistic enterprise be-
comes subject to extensive regulation by the state. Up until now, the
financial difficulties of the modem state could be adequately met by the
compulsory creation of producer cartels with monopoly rights in ex-
change against money contributions; an example could be the compul-
sory control of the gunpowder factories in Spain with monopoly protec-
tion against new foundations and a continuous high contribution to the
state treasury. The idea is suggestive: one might proceed in the same
way in the "socialization" of the capitalistic enterprises of individual
branches, by imposing compulsory cartels or combinations with obliga-
tions to pay large sums in taxes. Thus they could be made useful for
fiscal purposes, while production would continue to be oriented ra-
tionally to the price situation. - -

39. Repercussions of Public Financing on Private
Economic Activity

The way in which political and hierocratic bodies provide for their
corporate needs has very important repercussions on the structure of
private economic activity, A state based exclusively on money contribu-
tions, conducting the collection of the taxes (but no other economic
activity) through its own staff, and calling on personal service contribu-
tions only for political and judicial purposes, provides an optimal
environment for a rational market-oriented capitalism. A state which
collects money taxes by tax farming is a favorable environment for the
development of politically oriented capitalism, but it does not encourage
the orientation of profit-making activity to the market. The granting of
rights to contributions and their distribution as benefices normally tends
to check the development of capitalism by creating vested interests in the
maintenance of existing sources of fees and contributions. It thus tends
to stereotyping and traditionalizing of the economic system.

A political body based purely on deliveries in kind does not promote
the development of capitalism. On the contrary, it hinders it to the
extent to which it involves rigid binding of the structure of production
in a form which, from a point of view of profit-making enterprise, is
irrational,

A system of provision by compulsory services in kind hinders the
development of market capitalism above all through the confiscation of
the labor force and the consequent impediments to the development of a
free labor market. It is unfavorable to politically oriented capitalism be-
cause it removes the typical prospective advantages which enable it to
develop.

Financing by means of monopolistic profit-making enterprises has in

200 SOCr-Oi-OGICAL CATEGORIES OV ECONOMIC -iCTV,-''-; \ Ch. U

common with the use of contributions in kind which are sold for money
and with liturgical obligations on property, the fact: that t?;sy are all
unfavorable to the development of a type of capitalism which is autono-
mously oriented to the market On the contrary, they tend to repress ii by
fiscal measures which, from the point of view of the market, are irra-
tional, such as the establishment of privileges and of opportunities for
money making through other channels. They are, on the other hand,
under certain conditions favorable to politically oriented capitalism.

What is important for profit-making enterprises with fixed capital
and careful capital accounting is, in formal terms, above all, the calcula-,
biltty of the tax load. Substantively, it is important that there shall not be
unduly heavy burdens placed on the capitalistic employment of re-
sources, which means, above all, on market turnover. On the other
hand, speculative trade capitalism is compatible with any form of or-
ganization of public finances which does not, through tying it to
liturgical obligations, directly inhibit the trader's exploitation of goods
as commodities.

Though important, the form of organization of the obligations im-
posed by public finance is not sufficient to determine completely the
orientation of economic activity. In spite of the apparent absence of all
the more important obstacles of this type, no important development
of rational capitalism has occurred in large areas and for long periods.
On the other hand, there are cases where, in spite of what appear to
be very serious obstacles placed in its way by the system of public
finances, such a development has taken place. Various factors seern to
have played a part. Substantively, state economic policy may be very
largely oriented to non-economic ends. The development of the intel-
lectual disciplines, notably science and technology, is important. In addi-
tion, obstructions due to certain value-attitudes derived from ethical and
religious sources have tended to limit the development of an autonomous
capitalistic system of the modern type to certain areas. It must, further-
more, not be forgotten that forms of establishment and of the firm must,
like technical products, be "invented." In an historical analysis, we can
only point out certain circumstances which exert negative influences on
the relevant thought processes — that is, influences which impede or
even obstruct them — or .such which exert a positive, favoring influence.
It is not, however, possible to prove a strictly inevitable causal relation-
ship in such cases, any more than it is possible in any other case of
stricdy individual events.**

Apropos of the last statement, it may be noted that the concrete indi-
viduaJ events also in the field of the natural sciences can be rigorously

39 ] Repercussions of Public Financing on the Economy 201

reduced to their particular causal components only under very special
circumstances. There is thus no difference in principle between the field
of action and other fields.**

At this point it is possible to give only a few provisional indications
of the fundamentally important interrelationships between the form of
organization and administration of political bodies and the economic
system.

1. Historically, the most important case of obstruction of the develop- '
ment of market capitalism by turning public contributions into privately
held benefices is China. The conferring of contributions as fiefs, which
often cannot be differentiated from this, had the same effect in the Near
East since the time of the Caliphs. Both will be discussed in the proper
place. Tax farming is found in India, in the Near East, and in the
Western World in Antiquity and the Middle Ages. Particularly, how-
ever, in Antiquity, as in the development of the Roman class of tax-
farming financiers, the equites, it became decisive in determining the
mode of orientation of capitalistic acquisition. In India and the Near
East, on the other hand, it was more important in determining the de-
velopment and distribution of wealth, notably of land ownership.

2. The most important case in history of the obstruction or capital-
istic development by a liturgical organization of public finance is that of
later Antiquity. It was perhaps also important in India after the
Buddhist era and at certain periods in China. This also will be discussed
later.

3. The most important historical case of the monopolistic diversion
of capitalism is, after the Hellenistic, especially the Ptolemaic pre-
cursors, the period of royal monopolies and monopolistic concessions in
early modem times, which again will be discussed in the proper place.
A prelude to this development might be seen in certain measures intro-
duced by Emperor Frederick H in Sicily, perhaps following a Byzantine
model, and its final struggle in the conflict of the Stuarts with the Long
Parliament."

This whole discussion in such an abstract form has been introduced
only in order to make an approximately correct formulation of problems
possible. But before returning to the stages of development of economic
activity and the conditions underlying that development, it is necessary
to undertake a strictly sociological analysis of the non-economic compo-
nents.

ao. The Influence of Economic Factors on the Formation
of Orga?iizaiions

Economic considerations have one very general kind of sociological
importance for the formation of organizations if, as is almost always
tme, the directing authority and the administrative staff are remunerated.

20 2 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ck. 11

If this is the case, an overwhelmingly strong set of economic interests
become bound up with the continuation of the organization, even though
its primary ideological basis may in the meantime have ceased to exist.

It is an everyday occurrence that organizations of all kinds which,
even in the eyes of the participants, have become "meaningless," con-
tinue to exist because an executive secretary or some other official makes ■
his "living" in this manner and otherwise would have no means of support.

Every advantage which is appropriated, or even under certain circum-
stances one which has not been formally appropriated, may have the
effect of stereotyping existing forms of social action. Among the op-
portunities for economic profit or earnings in the field of the peaceful
provision for everyday wants, it is in general only the opportunities open
to profit-making enterprise which constitute autonomous forces that are
in a rational sense revolutionary; but even of them this is not always true.

For example, the interests of bankers in maintaining their commis-
sions long obstructed the recognition of endorsements on bills of ex-
change. Similfte-cases of the obstruction of formally rational institutions
by vested interests, which may well be interests in capitalistic profits,
will frequently be met with below. They are, however, appreciably rarer
than obstructions resulting from such factors as appropriation of bene-
fices, status advantages, and various economically irrational forces.

4 1 . The Mainspring of Economic Activity

All economic activity in a market economy is undertaken and carried
through by individuals acting to provide for their own ideal or material
interests. This is naturally just as true when economic activity is oriented
to the patterns of order of organizations, whether they themselves are
partly engaged in economic activity, are primarily economic in character,
or merely regulate economic activity. Strangely ?1 enough, this fact is often
not taken account of.

In an economic system organized' on a socialist basis, there would be
no fundamental difference iti this respect. The decision-making, of
course, would lie in the hands of the central authority, and the functions
of the individual engaged in the production of goods would be limited to
the performance of "technical" services; that is, to "labor" in the sense of
the term employed here. This would be true so long as the individuals
were being administered "dictatorially," that is, by autocratic determina-
tion from above in which they had no voice. But once any right of "co-
determination" were granted to the population, this would immediately

4i ] The Mainspring of Economic Activity 203

make possible, also in a formal sense, the fighting^ out of interest con Hie ts
centering on the manner of decision- ma king and, above all, on the ques-
tion of how much should be saved 0-C, put aside from current produc-
tion). But this is not the decisive point. What is decisive is that in
socialism, too, the individual will under these conditions ask first whether
to him, personally, the rations allotted and the work assigned, as com-
pared with other possibilities, appear to conform with his own interests.
This is the criscrion by which he would orient his behavior, and violent
power struggles would be the normal result: struggles over the alteration
or maintenance of rations once allotted— as, for instance, over ration
supplements for lieavv labor; appropriations or expropriations of particu-
lar jobs, sought after because of extra remuneration or pleasant working
conditions; work cessations, such as in strikes or lock-outs; restrictions of
production to enforce changes in the conditions of work in particular
branches; boycotts and the forcible dismissal of unpopular supervisors — ■
in short, appropriation processes of all kinds and interest struggles would
also then be the norma] phenomena of life. The fact that they would
for the most part be fought out through organized groups, and that ad-
vantages would be enjoyed on the one hand by the workers engaged in
the most essential services, on the other hand by those who were physi-
cally strongest, would simplv reflect the 'existing situation. But however
that might be, it would be the interests of the individual, possibly or-
ganized in terms of the similar interests of many individuals as opposed
to those of others, which would underlie all action. The sir«cfwre of
interests and the relevant situation would be different, and there would
be other means of pursuing interests, but this fundamental factor would
remain just as relevant as before. It is of course true that economic action
which is oriented on purely ideological grounds to the interests of others
does exist. But it is even more certain that the mass of men do not act
in this way, and it is an induction from experience that thev cannot do
so and never will.

In a completely socialized planned economy there would be scope
only for the following; (a) the distribution of real goods on the basis
of planned rationed needs; (b) the production of these goods according
to a plan of production. "Income" as a category of the money economy
would necessarily disappear, but rationed "receipts" would be' possible.

In a market economy the striving for income is necessarily the ulti-
mate driving force of all economic activity. For every disposition, insofar
as it makes a claim on goods or utilities which are not available to the
actor in a form fully ^sady for whatever use he intends, presupposes the
acquisition of and disposition over future income, and practically every
existing power of control over goods and services presupposes previous

2 O 4 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ch. 11

income. All business profits of enterprises will at some stage and in some
form be turned into the income of economically acting individuals. In
a "regulated economy" the principal aim of the regulations is generally
to affect in some manner the distribution of income. (In a "natural econ-
omy" we find no "income" in the usage of the present terminology;
instead there are "receipts" in the form of goods and services which
cannot be valued in terms of a unitary means of exchange.)

Income and receipts may, from a sociological point of view, take the
following principal forms and be derived from the following principal
sources :

A. — Incomes and receipts from personal services derived from special- ^
ized or specified functions :

(0 Wages: (a) Freely determined wage incomes or receipts con-
tracted at fixed rates per time period; (b) the same, determined on some
established scale (salaries or in-kind remuneration of public officials and
civil servants); (c) the labor return of hired workers on contracted piece
rates; (d) entirely open labor returns.

(2) Gains: (a) Free exchange profits deriving from the procurement
of goods and services on an entrepreneurial basis; (b) the same, but
regulated. In cases (a) and (b), "incomes" are calculated as net returns
after the deduction of costs, (c) Pisdatory gains; (d) Gains derived
from positions of political authority, fee incomes of an office, bribes, tax
farming, etc., obtained by the appropriation of power. In cases (c) and
(d), costs will be deducted to calculate "income" only if the activity is
conducted as a continuous organized mode of acquisition; otherwise the
gvoss revenue is usually considered "income."

B. — Income and receipts from property, derived from the exploitation *
of control over important means of production:

(1) Those in which "incorr>e' f is normally calculated as "net rent"
after the deduction of costs, (a) Rent obtained from the ownership of
human beings, as in the cssf of slaves, serfs or freedmen, These may
be receipts in money or in Lnd; they may be fixed in amount or consist
in shares of the source's earnings after the deduction of costs of main-
tenance, (b) Appropriated revenues derived from positions of political
authority (after the deduction of the costs of administration), (c) Rental
revenues derived from the ownership of land C.ntetayage payments or
fixed rents per unit of time, either in kind or in money, seigneurial rent
revenues — after deduction cl land taxes and costs of maintenance), (d)
House rents after deduction ;j£ expenses, (e) Rent receipts from ap
propriated monopolies (feudii banetites, patent royalties after the deduc-
tion of fees).

(2.) Property income anH receipts normally not requiring deduction

4i ] The Mainspring of Economic Activity 205

of costs from gross revenues: (a) Investment income (interest paid to
households or profit-making enterprises in return for the right to utilize
their resources or capital — see above, ch. II, sec. n). (b) "Interest"
fejm cattle loans O/iehrenten).** (c) "Interest" from other loans of con-
cr|te objects, and contracted "annuities in kind" (Deputatrenten). (d)
• Interest on money loans, (e) Money interest on mortgages, (f ) Money
returns from securities, which may consist in fixed interest or in dividends
varying with profitability, (g) Other shares in profits, such as shares in
the proceeds of "occasional" profit-making ventures and in profits from
rational speculative operations, and shares in the rational long-run profit-
making activities of all sorts of enterprises.

All "gains" and the dividend incomes from shares are either not con-
tracted (as to rate or amount) in advance, or only indirectly contracted
incomes (namely, through the agreement on prices or piece rates). Fixed
interest and wages, leases of land, and house rents are contracted in-
comes. Income from the exercise of power, from ownership of human
beings, from seigneurial authority over land, and predatory incomes all
involve appropriation by force. Income from property may be divorced
from any occupation in case the recipient lets others utilize the property.
Wages, salaries, labor profits, and entrepreneurial profits are, on the other
hand, occupational incomes. Other types of property incomes and gains
may be either one or the other. An exhaustive classification is not in-
tended here.

Of all types of incomes, it is particularly those from business profits
and the contracted piece rate or free labor incomes which have a dy-
namic, revolutionary significance for economic life. Next to these stand
incomes derived from free exchange and, in quite different ways, under
certain circumstances, the "predatory" incomes.

Those having a static, conservative influence on economic activity are
above all incomes drawn in accordance with a predetermined scale,
namely salaries, wages reckoned per unit of working time, gains from
the exploitation of office powers, and normally all kinds of fixed interest
and rents."

The economic source of "incomes" (in an exchange economy) lies
in a great majority of "cases in the exchange situation on the market for
goods and labor services. Thus, in the last analysis, it is determined by
consumers' demand, in connection with the more or less strong natural
or statutory monopolistic position of the parties to market relationships.

The economic source of "receipts" (in a natural economy) generally
lies in the monopolistic appropriation of opportunities to exploit property
or services for a return.

The underpinning of all these incomes is nothing but the possibility

2 06 SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [Ck. 11

of violence in the defence of appropriated advantages (see above, ch. II,
sec. i, pt, 4). Predatory incomes and related modes of acquisition are the
return on actual violence. An exhaustive classification had to be foregone
in this very rough first sketch.

In spite of mahy disagreements on particular points, I consider the
sections on "income" in R. Liefmann's works to be among the most valu-
able of his contributions. 68 The problems of economic theory involved
cannot be explored any further here; the interrelations between the eco-
nomic dynamics and the soda! order will have to be discussed time and
again.

NOTES

Unless otherwise indicated, notes are by Parsons.

1 . In the economic sense.

2. Robert Liefmann, Crundsatze der Volkswirtsckaftdehre, vol. I, 3rd ed.
(Stuttgart 1923), p. 74ff. and ■passim. (Wi)

3. See Franz Oppenheimer, System der So2tologie, Part III, Theorie der
reinen and 'polittschen Okonomie, 5th ed; (Jena 1923), pp. 146-152. (Wi)

4. The German word Technik which Weber uses here covers both the
meanings of the English word "technique" and of "technology." Since the dis
tinction is not explicitly made in Weber's terminology, it will have to be intro-
duced according to the context in the translation.

5. The term Verfiigungsgewalt, of which Weber makes a great deal of use,
is of legal origin, implying legally sanctioned powers of control and disposal. This,
nf course, has no place in a purely economic conceptual scheme but is essential to
a sociological treatment of economic systems^ It is another way of saying that con-
crete! v economic action depends on a system of property relations.

6. This is one of the many differences between China and the Western 1
World which Weber related to the difference of orientation to economic activities,
growing out of the religious differences of the two civilizations. See his The Religion
of China; Confucianism and Taoism, transl. H. H. Gerth (Glencoe, III. 195 1).

7. Beschaffutig Weber uses this term, which could be translated variously
as "making available," "bringing forth," "providing," etc., throughout this chapter
in combinations where today the term "production" has become usual, and we
normally translate it in this way. However, tKc term does cover, beyond produc-
tion in the narrow sense, also all manner of activities which make available
g™ lis, services, money, or anything else useful-*- that is, transport (as noted here),
trfl.i banking, etc. Wherever it was necessary to indicate this wider meaning
clc-.i ! v. we have translated the term as "procurement." (Wi)

. S, It is 1 striking fact that, particularly in primitive society, a very large pro-
porr>'>n of etonomicuily significant exchange is formally treated as an exchange
of ;,.l's. A return gift of suitable value is definitely obligatory but the specific
L-h;ir !- terisric of purely economically rational exchange, namely bargaining, is not
only h ■ isi-iir but is specifically prohibited.

o. Thv type case Weber has in mind is the relation of the state to the
modern system of property and contract. Whether or not private citizens will en-
gage in any given activity is no determined by the law. The latter is restricted

Notes 207

to the enforcement of certain .formal rules governing whoever does engage in such
activities.

10. This is a term which is not in general use in German economics, but
which Weber took over, as he notes below, from G. F. Knapp. There seems to be
no suitable English term and its use has hence been retained.

11. Theorie des Geldes und der Umlaufsmittel (Munich 191.2). English
edition: The Theory of Money and Credit, trsl. H. E. Batson (London 1934; 2d
rev. ed., New Haven 1953). (Wi) 1

12. English edition: The State Theory of Money, abridged ed., trsl. by H. M.
Lucas and J- Bonar, publ. for the Royal Economic Society (London 1924). (Wi)

13. Weber, as will become clear further on in this chapter, in common with
many of his contemporaries (including the leaders of the Bolshevik revolution in
Russia) strongly identified "socialism' and "communism" with the absence of
money and monetary categories (money prices, money wages, etc). In the event,
these categories were, of course, used in the Communist countries even in the
substantial absence of free markets, although their use was attended by many
difficulties, as yet unresolved, in the determination of rational prices. This is true
for the internal economy of these countries, but particularly true for the exchange
relations between the Communist countries (coexisting "communist organiza-
tions") which ate mentioned here. For the state of the debate in Weber's day,
see t F. A. Hayek (ed.), Collectivist Economic Planning (London 1935); an
appreciation of Weber's contribution, p. $z& . (Wi)

14. The concept Haushalt, as distinguished from Enoerb, is central to
Weber's analysis in this context. He means by it essentially what Aristotle meant
by the "management of a household" (Jowett's translation). It is a question of
rational allocation of resources in providing for a given set of needs. The concept
of budget and budgetary management seems to be the closest English equivalent
in common use.

15. Corresponding to the distinction of Haushalt and Erwerb, Weber dis-
tinguishes Vennogen and Kapital. They are, of course, classes of property distin-
guished in terms of their function in the management of an economic unit. There
is no English equivalent of Vermogen in this sense, and it has seemed necessary
to employ the more general term "wealth." Where there is danger of confusion, it
will be amplified as 'hudgetary wealth."

16. In common usage the term Erwerben would perhaps best be translated as
"acquisition." This has not, however, been used, as Weber is here- using the term
in a technical sense as the antithesis of Haushalten. "Profit-Making" brings out
this specific meaning much more clearly.

• 17. Since Weber wrote, there has been an extensive discussion of the problem
of whether rational allocation of resources was possible in a completely socialistic
economy in which there were no independent, competitively determined prices.
The principal weight of technical opinion seems at present to take the opposite
position from that which Weber defends here. A discussion of the problem will
be found in Oskar Lange and F. M. Taylor, On the Economic Theory of Social-
ism, edited by B. E. Lippincott (Minneapolis 1938). This book includes a bibli-
ography on the subject.

18. For the relevant articles by K. Rodbertus, see Jahrbiicher fur National-
okonontie und Stathtik, vols. IV, V, and VIII (1865-1869); K. Biicher, Industrial
Evolution, trsl. S. M. Wickett (New York 1901). (Wi)

19. On franco-currencies, see Economic History, 189^ on the Egyptian "grain
deposit banks," ibid., 59, (Wi)

20. Otto Neurath, Bayeriscke Sozialisierungserfahrungen, Vienna 1920; id.,

; a O 8 SOCIOLOGICAL CATEGORIES op economic action [ Ch. 11

VbUsoztaUsierung. Von der nacksten u. Hbernachsten Zukunft (Deutsche Ge-
meinwirtschitft, vol. j;; Jena 1920), and bibliography given there. Neurath,
incidentally, had not only written about and agitated for economic socialization,
hut also briefly worked as director of the Bavarian Zentralvrirtschaftsamt, the
agency in charge of socialization plans, during the Rdterepublik or "soviet" phase
of the Bavarian revolutionary regime in the spring of 1919; when he was brought
to trial after the suppression of the revolution, Weber testified in his defense.
See A. Mitchell, Revolution in Bavaria 1918-1919 (Princeton 1965), pp. 293-
305; Marianne Weber, Max Weber (Tubingen 1926), pp. 673 & 677; Ernst
Nkkisch, Gewagtes Leben (Koln 1958), pp. 53-57. (Wi)

11, J. C. L. Simonde de Sismondi, Essay X ("De la condition des cultivateurs
dans la Campagne de Rome") in his Etudes sur VEcononiie Politique, vol. II
(Paris 1838); W. Sombart, Die romische Campagna. Eine sozialoxonoroische *
Studie (Leipzig 1888). (Wi)

22. Oppenheimer, who was for pan of his life associated with the Henry
George movement, saw the ultimajp basis of capitalism in the appropriation of
land;he was himself'the founder of a "free land" movement. (Wi)
~ 23. English translation in F. A, Hayek (ed.), Collectivkl Economic Planning
(London 1935). (Wi)

24. Weber seems to have said in this passage in a somewhat involved way
what has come to be generally accepted among the more critical economic theorists
and the welfare economists. A simpler way of stating the same point is provided
by the doctrine of maximum satisfaction. This states the conditions under which,
to use Weber's phrase, formal and substantive rationality would coincide. It is
generally conceded that among these conditions is the absence of certain types of
inequality of wealth. One of the best statements of the problem is that or Frank
H, Knight in his essay "The Ethics of Competition," which js reprinted in the
book of that title. The problem of the relations of formal and substantive ration-
ality has for Weber, however, wider ramifications.

25. Proposals for the introduction of a planned economy made in the early
summer of 1919 by the first ReichswirUchaftsmimster of the Weimar Republic,
the Social Democrat Rudolf Wissell and his Undersecretary Wichard von Moel-
lendorff. After the rejection of his plans, Wissell resigned in July of that year
and was replaced by an opponent of planning. Cf. Arthur Rosenberg, A History
of ike German Republic, twl. I. F. D. Morrow and M. Sieveking (London 1936),
io8ff. The text of the proposals is included in WisseU's justification* of his conduct
of office: pToktache WbischaftS'poHtik. Unterlagen zur Beurteilung einer fiinf-
monatlichen Wtrtschaftsfiihrung (Berlin 1919), and in part also in Deutsche
GemeinwirUckaft, vols. 9 and 10 (Jena 19 19). (Wi)

. 26. English ed. : Industrial Evolution, transl. (from the 3rd German edition,
1900) byS. Morley Wickoff (New York 190 1 ). (Wi)

■ 27. In a good deal of his discussion, Weber uses the term Betrieb in a context
where this distinction is net important. To avoid a confusion of terms, it has in
general been found most convenient to translate Betrieb as "enterprise" (ef. the
definition of "enterprise" as continuous rational activity, above, ch. I:i5)> But
wherever the distinction made here is important in the context, the term "estab-
lishment" is used. Untemehmen has for the same reason been translated as "firm."
(Wi)

28. See above note. In most cases it has so far seemed best to translate
Erwerbsbetrieb with "enterprise."

29. See below, ch. II, sec. 20, point V. (Wi)

30. Weber here sides with Karl Biicher against a theory of developmental

Notes 209

stages propounded mainly by Gustav Schmoller, who defines stages in terms of
ruling groups, Cf. Schmoller, "Stadtische, territoriale und f -aatliche Wirtechafts-
polink," Jahrb. f. Gesetzgebung, Verwaltung if. Volfewtrtscfeaft, VIII (1884),
4ff. and II (1904), 668ff.; Biicher, "The Rise of the National Economy," in oil
Industrial Evolution) op. tit., 83-149. For the polemic between Schmoller and
Biicher, see ]b. f. G., V. & V., XVII and XVIII (1893-1894). See also below,
Part Two, ch. XVI:i: 4 . (Wi)

31. The corresponding German terms are: Hauswirtschaft, Dorfwirtschaft,
grwtdheniiche and patrimonialfurstliche Haushaltstvirtschaft, Stadtwirtschaft,
Territorkdwirtschaft, and Volkswirtschaft.

32. What Weber apparently has in mind is the type of "trust" which con-
trols all stages of the process of production from raw material to the finished
product. Thus many of our steel enterprises have not only blast furnaces and
rolling mills, but coal mines, coke ovens, railways and ships, and iron ore mines.
The most notable example in Germany in Weber's time was the Stinnes combine.

33. The demmrgoi were the public craftsmen ("those who work for the
people") of ancient Greece. Whether they were really on an annual retainer,
rather than being paid for the individual job, is Still controversial (cf. M. I,
Finley, The World of Oddyseus [New York 1959], 5if.); Weber himself usu-
ally cites the public artisans of Indian villages as an example (e.g., Economic
History, 34 f., 103Q (Wi)

34. K. Rodbertus, "Zur Geschiehte der romischen Tributsteuem seit Augus-
tus," Jahrbiicker f, Nationalok. u. Szttistik, IV (1865); cf. also Economic History,
108. (Wi)

35. Carolingian Imperial regulation prescribing detailed management proce-
dures for the royal estates (y'dlae'). (Wi)

36. Discussed in sec 20, below. (Wi)

37. Discussed in sec. 21, below. (Wi)

38. On Demosthenes' shops and the Carolingian women's house (gewitiaw),
see Economic History, 104$.; oii Roman estate shops, H. Gummerus, Der
romische Gutsbetrieb ah whtschafi*., Qrganismus nick den Werken des Cato,
Varro und Cofwrnella (Leipzig 1906); on the Russian serf factory, see M. I.
Tugan-Baranovskii, Gescfticfite der russischen Vabnk, transl. B. Minzes (Berlin
1900). (Wi)

39. Beunden were plots of land exempt from the cultivation regulations (crop
rotation, grazing rights, etc.) of the viHage (Mark-) association; in contrast to
ordinary arable, they could be fenced. Herrenbeunden, or unrestricted seigneurial
farms operated by a special officiai (J&eundehofmann), are found in early docu-
ments. J. & W. Grimm, Dewtsches V-Zdrterbtich, I (Leipzig 1854). (Wi)

40. The term Paria is used by Weber in a technical sense to designate a
group occupying the same territorial area as others, but separated from them by
ritual barriers which severely limit social intercourse between the groups. It has
been common for such groups to have specialized occupations, particularly occu-
pations which are despised in the larger society.

41. What is ordinarily called a "producers' co-operative association" would be
included in this type, but Weber conceives the type more broadly. In certain
respects, for instance, the medieval village community could be considered an ex-
ample.

42. On the "freed mountains" and "mining freedom," see Economic History,
I 4 2f. (Wi)

43. His real name was John Winchcombe. See W. J. Ashley, An Introduc-

2 I O SOCIOLOGICAL CATEGORIES OF ECONOMIC ACTION [ Ck. II

tion to English Economic History and Theory, II (London 1893), Z2$t. and
i55f.. who reprmtfcfiart of the poem; also Economic History, 132. (Wi)

44. That is without rights of inheritance or alienation. See above chap. I,
sec, 10.

45. This chapter is, however, a mere fragment which Weber intended to
develop on a scale comparable with the others. Hence most of the material to
which this note refers was probably never written down.

46. For a discussion of Stor, "wage work," and "price work," see Karl
Bucher, Industrial Evolution, op. cit., chap. 4. (Wi)

47. On coloni, see Economic History, 56, 73. (Wi)

48. It seems curious that in this, classification Weber failed to mention the
type of agricultural organization which has become predominant in the staple
agricultural production of much of the United States and Canada. Of the Euro-
pean types this comes closest to large-scale peasant proprietorship, but is much
more definitely oriented to the market for a single staple, such as wheat. Indeed,
in many respects this type of farm is closely comparable to some kinds of small-
scale industrial enterprise.

49. On this peculiar phenomenon, see Economic History, 35, (Wi)

49a, Memorandum on the question of a legal provision to protect the home-
steads of smallholders against legal execution ("Empfiehlt sich die Einfuhrung
eines Heimstattenrechtes, insbesondere zum Schutz des Meinen Grundbesitzes
gegen Zwangsvollstreekung?") in Deutscher juristentag XXIV (1897), Verhand-
lungen, II, 15-32. (W)

50. Weber uses the term Alltag in a technical sense, which is contrasted with
Charisma. The antithesis will play a leading role in chap. III. In his use of the
terms, however, an ambiguity appears of which he was probably not aware. In
some contexts, Alltag means routine, as contrasted with things which are excep-
tional or extraordinary and hence temporary. Thus, the charismatic movement
led by a prophet is, in the nature of the case, temporary, and if it is to survive at
all must find a routine basis of organization. In other contexts, Alltag means the
profane, as contrasted with the sacred. The theoretical significance of this ambigu-
ity has been analysed in [Parsons,] Structure of Social Action, chap. xvii.

51. There are several different factors involved in the inability to predict
future events with complete certainty. Perhaps the best known analysis of these
factors is that of F. H. Knight in his Risk, UMcertawfy and Profit.

52. On the Chinese and Hamburg kiwco-money (deposit certificates), sec
Economic History, iSof. (Wi)

53. In a well-known essay, "The Social Causes of the Decay of Ancient
Civilization," (/-. of General Education, V, 1950, 75-88), Weber attributed to
this factor an important role in the economic decline and through this the cul-
tural changes of the Roman Empire.

54. G. F. Knapp, The State Theory of Money, of. cit., 1 1. (Wi)

55. For the exact definition of "currency money," see Knapp, The State
Theory of Money, tooff. (Wi)

56. Note money is discussed in sec. 34, below; metal money in this and the
following section. (Wi)

57. Most of the special terminology employed here was coined by Knapp, but
never came to be really widely used. "Lyrric," from the Greek lytron = means of
payment, designates specifically the agencies or institutions connected with pay-
ments or regulating payment instruments. "Hyiodromy," literally the rate of
exchange- (Kuts = dromoi) of currency metals (matter = hyle% Knapp defines

Notes 2 i i

as a state characterized by "the deliberate fixing of the pnct of a hylic metal"
(Knapp, The State Theory of Money, 79). (Wi)

58. It should he home in mind that this was written in 1919 or 1920, The
situation has clearly been radically changed by the developments since that time.

59. This is an application of Weber's general theory of the relations of inter-
ests and ideas, which is much further developed in his writings on the Sociology
of Religion. The most important point is that he refused to accept the common
dilemma that a given act ij motivated either by interests or by ideas. The influ-
ence of ideas is rather to be found in their function of defining the situations in
which interests are pursued. Beside in Weber's own works, this point is developed
in [Parsons'] article "The Role of Ideas in Social Action," American Sociological
Review, October 1938.

60. Knapp, The State Theory of Money, 48. (Wi)

61. Mazenatisch, This term is commonly used in German but not in the
precise sense which Weber gives it here. There seems to be no equivalent single
term in English, so the idea has been conveyed by a phrase.

62. For the complex history of this institution, the later Preussische Staats-
hank, see W. O. Henderson, The State and the Industrial Revolution in Prussia,
1740— 1870 (Liverpool 1958), i t -147. Founded in 1772 by Frederick II as a
primarily government-owned overseas trade agency, the Seehandlung eventually
turned into a fully government-owned commercial bank used to float state loans
and, 1 to some extent, to finance desired industrial development. (Wi)

63. The methodological problems touched here have been further discussed
in various of the essays collected in the volume GAiW . The most essential point
is that Weber held that no scientific analysis in the natural or the social field ever
exhausts the concrete individuality of the empirical world. Scientific conceptual
schemes and the causa! explanations attained through their use are always in
important respects abstract.

64. Cf. Weber's essay on "Roscher und Knies und die logischen Probleme
der hisrorischen National 6 konomie," GAzW, znd ed., 1951, 56, 64ff. (Wi)

6>. See Economic History, 21 3 and 256L (Wi)

66. On cattle loans, see Economic History, 56 and 201. (Wi)

67. The distinction here made between those types of economic interest hav-
ing a dynamic and a static influence on economic activity respectively, is strikingly
similar to that made by Pareto between "speculators" and "rentiers;" see TJie
Mind and Society, especially sees. 22, $4ff.

68. See Robert Liefmann, Ertrag itnd Einkommen attf Gmndlage einer rein,
suhjektiven Wertlehre (Jena 1907); Liefmann, Grundsdtze der VcVuwirtschafts-
lehre (Stuttgart 1919), vol. II, parts VIII-IX, esp. 636-710. (Wi)

CHAPTER

III

THE TYPES OF LEGITIMATE
DOMINATION

The Basis of Legitimacy

i. Domination and Legitimacy

Domination was defined above (ch. I:i6) as the probability that
certain specific commands (or all commands) will be obeyed by a given
group of persons. It thus does not include every mode of exercising
"power" or "influence" over other persons. Domination ("authority") 1
in this sense may be based on die roost diverse motives of compliance:
all the way from simple habituation to the most purely rational calcula-
tion of advantage. Hence every genuine form of domination implies
a minimum of voluntary compliance, that is, an interest (based on
ulterior motives or genuine acceptance) in obedience.

Not every case of domination makes use of economic means; still less
*does<4fr always have economic objectives. However, normally the rule
over a considerable number of persons requires a staff (cf. ch. 1: 12),
that is, a special group which can normally be trusted to execute the
general policy as well as the specific commands. H»e members of the
administrative staff may be bound to obedience to their superior (or su-
periors) by custom, by aftectual ties, by a purely material complex of

\ V

i ] The Basis of Legitimacy 2 1 3

interests, or by ideal (wertrationale) motives. The quality of these mo-
tives largely determines the type of domination. Purely material interests
and calculations of advantages as the basis of solidarity between the chief
and his administrative staff result, in this as in other connexions, in a
relatively unstable situation. Normally other elements, affectual and
ideal, supplement such interests. In certain exceptional cases the former
alone may be decisive. In everyday life these relationships, like others,
are governed by custom and material calculation of advantage. But cus-
tom, personal advantage, purely affectual or ideal motives of solidarity,
do not form a sufficiendy reliable basis for a given domination. In addi-
tion there is normally a further element, the belief in legitimacy.

Experience shows that in no instance does domination voluntarily
limit itself to the appeal to material or affectual or ideal motives as a basis
for its continuance. In addition every such system attempts to establish
and to cultivate the belief in its legitimacy. But according to the kind of
legitimacy which is claimed, the type of obedience, the kind of adminis-
trative staff developed to guarantee it, and the mode of exercising author-
ity, 1 will all differ fundamentally. Equally fundamental is the variation in
effect. Hence, it is useful to classify the types of domination according
to the kind of claim to legitimacy typically made by each. In doing this,
it is best to start from modem and therefore more familiar examples.

1. The choice of this rather than some other basis of classification
can only be justified by its results- The fact that certain other typical
criteria of variation are thereby neglected for the time being and can
only be introduced at a later stage is not a decisive difficulty. The legiti-
macy of a system of control has far more than a merely "ideal" signifi-
cance, if only because it has very definite relations to the legitimacy of
property.

2. Not every claim which is protected by custom or law should
be spoken of as involving a relation of authority. Otherwise the worker,
in his claim for fulfilment of the wage contract, would be exercising au-
thority over his employer because his claim can, on occasion, be enforced
by order of a court. Actually his formal status is that of party to a con-
tractual relationship with his employer, in which he has certain "rights"
to receive payments. At the same time the concept of an authority rela-
tionship QienschajtsverhSitnis) naturally does not exclude the possibil-
ity that it has originated in a formally free contract This is true of the
authority of the employer over the worker as manifested in the former's
rules and instructions regarding the work process; and also of the author-
ity of a feudal lord over a vassal who has freely entered into the relation
of fealty. That subjection to military discipline is formally "involuntary"
while that to the discipline of the factory is voluntary does not alter the
fact that the latter is also a case of subjection to authority. The position
of a bureaucratic official is also entered into by contract and can be

2 14 THE TYPES OF^LEGITIMATE DOMINATION ' [Ck. Ill

freely resigned, and even the status of "subject" can often be freely
entered into and (in certain circumstances) freely repudiated. Only in
the limiting case of the slave is formal subjection to authority absolutely
involuntary.

On the other hand, we shall not speak of formal domination if a
monopolistic position permits a person to exert economic power, that is,
to dictate the terms of exchange to contractual partners. Taken by itself,
this does not constitute authority any more than any other kind of in-
fluence which is derived from some kind of superiority, as by virtue of
erotic attractiveness, skill in sport or in discussion. Even if a big bank is
in a position to force other banks into a cartel arrangement, this will not
alone be sufficient to justify calling it an authority. But if there is ar>
immediate relation of command and obedience such that the manage-
ment of the first bank can give orders to the others with the claim that
thev shall, and the probability that they will, be obeyed regardless of
particular content, and if their carrying out is supervised, ifis; another
matter. Naturally, here as everywhere the transitions are, gradual; there
are all sorts of intermediate steps between mere indebtedness and debt
slavery. Even the position of a "salon" can come very close to the border-
line of authoritarian domination and yet not necessarily constitute "au-
thority." Sharp differentiation in concrete fact is often impossible, but
this makes clarity in the analytical distinctions all the more important.

3. Naturally, the legitimacy of a system of domination may be treated
sociologically only as the probability that to a relevant degree the appro-
priate attitudes will exist, and the corresponding practical conduct ensue.
It is by no means true that every case of submissiveness to persons in
positions of power is primarily Cor even at all) oriented to this belief.
Loyalty may be hypocritically simulated by individuals at by whole
groups on purely opportunistic grounds, or Carried out in practice for
reasons of material self-interest. Or people may submit from individual
weakness and helplessness because there is no acceptable alternative.
But these considerations are not decisive for the classification of types of
domination. What is important is the fact that in a given case the partic-
ular claim to legitimacy is to a significant degree and according to its
type treated as "valid"; that this fact confirms the position of the persons
claiming authority and that it helps to determine the choice of means of
its exercise.

Furthermore, a system of domination may — as often occurs in practice
— be so completely protected, on the one hand by the obvious commu-
nity of interests between the chief and his administrative staff (body-
guards, Pretorians, "red" or "white" guards) as opposed to the subjects, on
the other hand by the helplessness of the latter, that it can afford to drop
even the pretense of a claim to legitimacy. But even then the mode of
legitimation of the relation between chief and his s^aff may vary widely '
according to the type of basis of the relation of the authority between
them, and, as will be shown, this variation is highly significant for the
structure of domination,

i ] The Basis of Legitimacy 2 1 5

4. "Obedience" will be taken to mean that the action of the person
obeying follows in essentials such a course that the content of the com-
mand may be taken to have become the basis of action for its own sake.
Furthermore, the fact that it is so taken is referable only to the formal
obligation, without regard to the actor's own attitude to the value or lack
of value of the content of the command as such.

5. Subjectively, the causal sequence may vary, especially as between
"intuition" and "sympathetic agreement." This distinction is not, how-
ever, significant for the present classification of types of authority.

6. The scope of determination of social relationships and cultural
phenomena bv virtue of domination is considerably broader than appears
at first sight. For instance, the authority exercised in the schools has much
to do with the determination of the forms of speech and of written lan-
guage which lire regarded as orthodox. Dialects used as the "chancellery
language" of autocephalous political units, hence of their rulers, have often
become orthodox forms of speech and writing and have even led to the
formation of separate "nations" (for instance, the separation of Hol-
land from Germany). The rule bv parents and the school, however,
extends far beyond the determination of such cultural patterns, which
are perhaps only apparently formal, to the formation of the young, arid
hence of human beings generally.

7. The fact that the chief and his administrative staff often appear
formally as servants or agents of those they rule, naturally does nothing
whatever to disprove the quality of dominance. There will be occasion
later to speak of the substantive features of so-called "democracy." But a
certain minimum of assured power to issue commands, thus of domina-
tion, must be provided for in nearly every conceivable case.

2. The Three Pure Types of Authority

There are three pure types of legitimate domination. The validity
of the claims to legitimacy may be based on:

1. Rational grounds- — resting on a belief in the legality of enacted
rules and the right of those elevated to authority under such rules to issue
commands (legal authority).

2. Traditional grounds — resting on an established belief in the sanc-
tity of immemorial traditions and the legitimacy of those exercising
authority under them (traditional authority); or finally,

3. Charismatic grounds — resting on devotion to the exceptional
sanctity, heroism or exemplary character of an individual person, and of
the normative patterns or order revealed or ordained by him (charismatic
authority).

In the case of legal authority, obedience is owed to the legally estab-
lished impersonal order. It extends to the persons exercising the authority

2 I 6 THE TYPES OF LEGITIMATE DOMINATION [ Ck. Ill

of office under it by virtue of the formal legality of their commands and
only within the scope of authority of the office. In the case of traditional
authority, ohedience is owed to the -person of the chief who occupies the
traditionally sanctioned position of authority and who is (within its
sphere) bound by tradition. But here the obligation of obedience is a
matter of personal loyalty within the area of accustomed obligations. In
the case of charismatic authority, it is the charismatically qualified leader
as such who is obeyed by virtue of personal trust in his revelation, his
heroism or his exemplary qualities so far as they fall within the scope of
the individual's belief in his charisma.

i. The usefulness of the above classification can only be judged by
its results in promoting systematic analysis. The concept of "charisma"
("the gift of grace") is taken from the vocabulary of early Christianity.
For the Christian hierocracy Rudolf Sohm, in his Kirchenrecht, was the
first to clarify the substance of the concept, even though he did not use
the same terminology. Others (for instance, Holl in Entkustasmas und
Bussgewahy have clarified certain important consequences of it. It is
thus nothing new.

2. The fact that none of these three ideal types, the elucidation of
which will occupy the following pages, is usually to be found in his-
torical cases in "pure" form, is naturally not a valid objection to attempt-
ing their conceptual formulation in the sharpest possible form. In this
respect the present case is no different from many others. Later on (sec.
ii ff.) the transformation of pure charisma by the process of routiniza-
n'on will be discussed and thereby the relevance of the concept to the
understanding of empirical systems of authority considerably increased.
But even so it may be said of every historical phenomenon of authority
that it is not likely to be "as an open book." Analysis in terms of socio-
logical types has, after all, as compared with purely empirical historical
investigation, certain advantages which should not be minimized. That
is, it can in the particular case of a concrete form of authority determine
what conforms to or approximates such types as "charisma," "hereditary
charisma," "the charisma of office," "patriarchy," "bureaucracy,'' the au-
thority of status groups, and in doing so it can work with relatively un-
ambiguous concepts. But the idea that the whole of concrete historical
reality can be exhausted in the conceptual scheme about to be developed
is as far from the author's thoughts as anything could be.

« ] Legal Authority With a Bureaucratic Staff 2 1 7

Legal Authority With a Bureaucratic

Administrative Staff

Note: The specifically modern type of administration has intentionally
been taken as a point of departure in order to make it possible later to
contrast the others with it.

3. Legal Authority: The Pure Type

Lagal authority rests on the acceptance of the validity of the follow-
ing mutually inter-dependent ideas.

1 . That any given legal norm may be established by agreement or by
imposition, on grounds of expediency or value-rationality or both, with
a claim to obedience at least on the part of the members of the organi-
zation. This is, however, usually extended to include all persons within
the sphere of power in question — which in the case of territorial bodies
is the territorial area — who stand in certain social relationships or carry
out forms of social action which in the order governing the organization
have been declared to be relevant.

2. That every body of law consists essentially in a consistent system
of abstract rules which have normally been intentionally established.
Furthermore, administration of law is held to consist in the application
of these rules to particular cases; the administrative process in the rational
pursuit of the interests which are specified in the order governing the
.organization within the limits laid down by legal precepts and following
principles which are capable of generalized formulation and are approved
in the order governing the group, or at least not disapproved in it.

3. That thus the typical person in authority, the "superior/* is him-
self subject to an impersonal order by orienting his actions to it in his
own dispositions and commands. (This is true not only for persons exer-
cising legal authority who are in the usual sense "officials," but, for
instance, for the elected president of a state.T~*~~

4. That the person who obeys authority does so, as it is usually
stated, only in his capacity as a "member" of the organization and what
he obeys is only "the law." (He may in this connection be the member

2 I 8 THE TYPES OF LEGITIMATE DOMINATION [ Ck. HI

of an association, of a community, of a church, or a citizen of a state.)
5. In conformity with point 3, it is held that the members of the
organization, insofar as they obev a person in authority, do not owe this
obedience to him as an individual, but to the impersonal order. Hence, it
follows that there is an obligation to obedience only within the sphere
of the rationally delimited jurisdiction which, in terms of the order, has
been given to him.

The following may thus be said to be the fundamental categories of
rational legal authority:

(1) A continuous rule-bo'ind conduct of official business.

(2) A specified sphere of competence (jurisdiction). This involves:
(a) A sphere of obligations to perform functions which Has been marked
off as part of a systematic division of labor, (b) The provision of the
incumbent with the necessary powers, (c) That the necessary means of
compulsion are clearly defined and their use is subject to definite condi-
tions. A unit exercising authority which is organized in this way will be
calbd an "administrative organ" or "agency" (Behorde).

There are administrative organs in this sense in large-scale private
enterprises, in parties and armies, as well as in the state and the church.
An elected president, a cabinet of ministers, or a body of elected "Peo-
ple's Representatives" also in this sense constitute administrative organs.
This is not, however, the place to discuss these concepts. Not every
administrative organ is provided with compulsory powers. But this dis-
tinction is not important for present purposes.

(3) The organization of offices follows the principle of hierarchy;
that is, each lower office is under the control and supervision of a
higher one. There is a right of appeal and of statement of grievances from
the lower to the higher. Hierarchies differ in respect to whether and in
what cases complaints can lead to a "correct" ruling from a higher
authority itself, or whether the responsibility for such changes is left to the
lower office, the conduct of which was the subject of the complaint.

(4) The rules which regulate the conduct of an office may be techni-
cal rules or norms. 2 In both cases, if their application is to be fully ra-
tional, specialized training is necessary. It is thus normally true that only
a person who has demonstrated an adequate technical training is qualified
to be a member of the administrative staff of such an organized group,
and hence only such persons are eligible for appointment to official
positions. The administrative staff of a rational organization thus typically
consists of "officials," whether the organization be devoted to political,
hierocratic, economic — in particular, capitalistic— -or other endsi

(5) In the rational type it is a matter of principle that the members
of the administrative staff should be completely separated from owner-

ii ] Legal Authority With a Bureaucratic Staff 2 1 9

ship of the means of production or administration. Officials, employees,
and workers attached to the administrative staff do not themselves own
the non-human means of production and administration. These are
rather provided for their use, in kind or in money ; and the official is
obligated to render an accounting of their use. There exists, furthermore,
in principle complete separation of the organization's property (respec-
tively, capital), and the personal property (household) of the official.
There is a corresponding separation of the place in which official func-
tions are carried out— the "office" in the sense of premises — from the living
quarters.

(6) In the rational type case, there is also a complete absence of
appropriation of his official position by the incumbent. Where "rights" to
an office exist, as in the case of judges, and recently of an increasing
proportion of officials and even of workers, they do not normally serve
the purpose of appropriation by the official, but of securing the purely
objective and independent character of the conduct of the office so that
it is oriented only to the relevant norms.

(7) Administrative acts, decisions, and rules are formulated and
recorded in writing, even in cases where oral discussion is the rule or is
even mandatory. This applies at least to preliminary discussions and
proposals, to final decisions, and to all sorts of orders and rules. The
combination of written documents and a continuous operation by
officials constitutes the "office" (Bureau)' 1 which is the central focus
of all types of modern organized action. .

(8) Legal authority can be exercised in a wide variety of different
forms which will be distinguished and discussed later. The following
ideal-typical analysis will be deliberately confined for the time being to
the administrative staff that is most unambiguously a structure of domi-
nation: "officialdom" or "bureaucracy."

In the above outline no mention has been made of the kind of head
appropriate to a system of legal authority. This is a consequence of cer-
tain considerations which can only be made entirely understandable at
a later stage in the analysis. There are very important types of rational
domination which, with respect to the ultimate source of authority, be-
long to other categories. This is true of the hereditary charismatic type,
as illustrated by hereditary monarchy, and of the pure charismatic type
of a president chosen by a plebiscite. Other cases involve rational ele-
ments at important points, but are made up of a combination of bureau-
cratic and charismatic components, as is true of the cabinet form of
government. Still others are subject to the authority of the chiefs of other
organizations, whether their character be charismatic or bureaucratic;
thus the formal head of a government department under a parliamentary

2 2 O THE TYPES OF LEGITIMATE DOMINATION [ Ch. Ill

regime may be a minister who occupies his position because of his au-
thority in a party. The type of rational, legal administrative staff is cap;
able of application in all kinds of situations and contexts. It is the most
important mechanism for the administration of everyday affairs. For in
that sphere, the exercise of authority consists precisely in administration.

4. Legal Authority: The Pure Type (Continued)

The purest type of exercise of legal authority is that which employs
a bureaucratic administrative staff. Only the supreme chief of the organi-
zation occupies his position of dominafnce (fierrenstellung) by virtue
of appropriation, of election, or of having been designated for the suc-
cession. But even feis authority consists in a sphere of legal "competence."
The whole administrative staff under the supreme authority then con-
sists, in the purest type, of individual officials (constituting a "mono-
cracy" as opposed to the "collegia!" type, which will be discussed below)
who are appointed and function according to the following criteria:

CO They are personally free and subject to authority only with
respect to their impersonal official obligations.

(2) They are organized in a clearly defined hierarchy of offices,

(3) Each office has a clearly defined sphere of competence m the
legal sense.

(4) The office is filled by a free contractual relationship. Thus, in
principle, there is free selection.

(5) Candidates are selected on the basis of technical qualifications.
In the most rational case, this is tested by examination or guaranteed by
diplomas certifying technical training, or both. They are appointed, not
elected.

^6) They are remunerated by fixed salaries in money, for the most
part with a right to pensions. Only under certain circumstances does the-
employing authority, especially in private organizations, have a right to
terminate the appointment, but the official is always free to resign. The
salary scale is graded according to rank in the hierarchy; but in addition
to this criterion, the responsibility of the position and the requirements
of the incumbent's social starts may be taken into act.ouiit (cf. ch. IV).

(7) The office is treated as the sole, or at least the primary, occupa-
tion of the incumbent.

(8) It constitutes a career. There is a system of "promotion" accord-
ing to seniority or. to achievement, or both. Promotion js> dependent on
the judgment of superiors.

» ] Legal Authority With a Bureaucratic Staff 2 2 1

(9) The official works entirely separated from ownership of the
means of administration and without appropriation of his position.

(10) He is subject to strict and systematic discipline and control in
the conduct of the office.

This tyrSe of organization is in principle applicable with equal facility
to a wide variety of different fields. It may be applied in profit-making
business or in charitable organizations, or in any number of other types
of private enterprises serving ideal or material ends. It is equally appli-
cable to political and to hierocratic organizations. With the varying
degrees of approximation to a pure type, its historical existence can be
demonstrated in all these fields.

1. For example, bureaucracy is found in private clinics, as well as in
endowed hospitals or the hospitals maintained by religious orders. Bu-
reaucratic organization is well illustrated by the administrative role of
the priesthood (Kaphinokratie') in the modem [Catholic] church, which .
has. expropriated almost all of the old church benefices, which were in

^former days to a large extent subject to private appropriation. It is also
illustrated by the notion of a [Papal] universal episcopate, which is
thought of as formally constituting a universal legal, competence in reli-
gious matters. Similarly, the doctrine of Papal infallibility is thought of
as in fact involving a universal competence, but only one which func-
tions "ex cathedra" in the sphere of the office, thus implying the typical
distinction between the sphere of office and that of the private affairs of
the incumbent. The same phenomena are found in the large-scale capi-
talistic enterprise; and the larger it is, the greater their role. And this is
not less true of political parties, which will be discussed separately. Fin-
ally, the modem army is essentially a bureaucratic organization adminis-
tered by that peculiar type of military functionary, the "officer."

2. Bureaucratic authority is carried out in its purest form where it is
most clearly dominated by the principle of appointment. There is no
such thing as a hierarchical organization of elected officials. In the first
place, ft is impossible to attain a stringency of discipline even approach-
ing that in the appointed type, since the subordinate official can stand
on his own election and since his prospects are not dependent on the
superior's judgment. (On elected officials, see below, sec. 14.)

3. Appointment by free contract, which makes free selection possible,
is essential to modern bureaucracy. Where there is a hierarchical organi-
zation with impersonal spheres of competence, but occupied by unfree
officials — like slaves or ministeriaUs, who, however, function in a for-
mally bureaucratic manner — the term "patrimonial bureaucracy" will be
used.

4. The role of technical qualifications in bureaucratic organizations
is continually increasing. Even an official in a party or a trade-union
organization is in need of specialized knowledge, though it is usually
developed by experience rather than by formal training. In the modem

2 2 2 THE TYPES OF LEGITIMATE DOMINATION [ Ch. Ill

state, the only "offices" For which no technical qualifications are re-
quired are those of ministers and presidents. This only goes to prove that
they are "officials" only in a formal sense, and not substantively, just like
the managing director or president of a large business corporation. There
is no question but that the "position" of the capitalistic entrepreneur is
as definitely appropriated as is that of a monarch. Thus at the top of a
bureaucratic organization, there is necessarily an element which is at
least not purely bureaucratic. The category of bureaucracy is one ap-
plying only to the exercise of control by means of a particular kind of
administrative staff,

j. The bureaucratic official normally receives a fixed salary. (By
contrast, sources of income which are privately appropriated will be
called "benefices" (.Pfrunden') — on this concept, see below, sec- 8.)
Bureaucratic salaries are also normally paid in money. Though this is
not essential to the concept of bureaucracy, it is the arrangement which
best fits the pure type. (Payments in kind are apt to have the character
of benefices, and the receipt of a benefice normally implies the appropri-
ation of opportunities for earnings and of positions.) There are, how-
ever, gradual transitions in this field with many intermediate types.
Appropriation hy virtue of leasing or sale of offices or the pledge of in-
come from office are phenomena foreign to the pure tvpe of bureauc-
racy (cf. iufru, rice. 7.1:-. 111: 3).

6. "Offices"- which do not constitute the incumbent's principal occu-
pation, in particular "honorary" offices, belong in other categories,
which will be discussed later (sec, 19O. The typical "bureaucratic"
official occupies the office as his principal occupation.

7. With respect to the separation of the official from ownership of
the means of administration, the situation is exactly the same in the
field of public administration and in private bureaucratic organizations,
such as the large-scale capitalistic enterprise.

8. Collegia] bodies will be discussed separately below (section 15).
At the present time they are rapidly decreasing in importance in favor
of types of organization which are in fact, and for the most part formally
as well, subject to the authority of a single head. For instance, the col-
legia! "governments" in Prussia have long since given way to the mono-
cratic "district president" (RegierungfyTasident~). The decisive factor in
this development has been the need for rapid, clear decisions, free of the
necessity of compromise between different opinions and also free of
shifting majorities.

9. The modern army officer is a type of appointed official who is
clearlv marked off by certain status distinctions. This will be discussed
elsewhere (ch. IV). In this respect such officers differ radically from
elected military leaders, from charismatic condottieri (sec. 10), from the
type of officers who recruit and lead mercenary armies as a capitalistic
enterprise, and, finally, from the incumbents of commissions which have
been purchased (sec. 7a). There may be gradual transitions between
these types. The patrimonial "retainer," who is separated from the means

ii ] Legal Authority With a Bureaucratic .Staff 223

of carrying out his function, and the proprietor of a mercenary army for
capitalistic purposes have, along with the private capitalistic entrepre-
neur, been pioneers in the organization of the modern type of bureauc-
racy. This will be discussed in detail below.

5. Monocratic Bureaucracy

Experience tends universally to show that the purely bureaucratic
type of administrative organization— that is, the monocratic variety of
bureaucracy—is, from a purely technical point of view, capable of attain-
ing the highest degree of efficiency and is in this sense formally the most
rational known means of exercising authority over human beings. It is
superior to any other form in precision, in stability, in the stringency
of its discipline, and in its reliability. It thus makes possible a particularly
high degree of'calculability of results for the heads of the organization
and for those acting in relation to it. It is finally superior both in in-
tensive efficiency and in the scope of its operations, and is formally
capable of application to all Tiinds of administrative tasks.

The development of modern forms of organization in all fields is
nothing less than identical with the development and continual spread
of bureaucratic administration, This is true of church and state, of armies,
political parties, economic enterprises, interest groups, endowments,
clubs, and many others. Its development . is, to take the most striking
case, at the root of the modern Western state. However many forms
there may be which do not appear to fit this pattern, such as collegial
representative bodies, pariiamentarv committees, soviets, honorary officers,
lay judges, and what not, and however many people may complain about
the "red tape," it would be sheer illusion to think for a moment that
continuous adminwtativc work can he carried out in any field except by
means of officials working in ■ Alices. The whole pattern of everyday life
is cut to fit th>. framework. If bureaucratic administration is, other things
being equal, alway.- the most rational type from a technical point of
view, the needs of mass administration make it today completely indis-
pensable. The choice is only that between burcauu icy and dilettantism
in the field of aJministjat'on,

The primary source of the superiority of bureaucratic administration
lies in the role of technical knowledge which, through the development
of modern technology and business methods in the production of goods,
has become completely indispensable. In this respect, it makes no dif-
ference whether the economic system is organized on a capitalistic or a
socialistic basis. Indeed, if in the latter case a comparable level of technical

2 2 4 raE -TYPES OF LEGITIMATE DOMINATION [ Ch. HI

efficiency were to be achieved, it would mean a tremendous increase in
the importance of professional bureaucrats.

When those subject to bureaucratic control seek to escape the in-
fluence of the existing bureaucratic apparatus, this is normaHy possible
only by creating an organization of their own which is equally subject
to bureaucratization. Similarly the existing bureaucratic apparatus is
driven to continue functioning by the most powerful interests which are
material and objective, but also ideal in character. Without it, a 'society
like our own — with its separation of officials, employees, and workers
from ownership of the means of administration, and its dependence on
discipline and on technical trainings — could no longer function. The only
exception would be those groups, such as the peasantry, who are still in
possession of their own means of subsistence. Even in the case of revolu-
tion by force or of occupation by an enemy, the bureaucratic machinery
will normally continue to function just as it has for the previous legal
government.

The question is always who controls the existing bureaucratic ma-
chinery^ And such control is possible only in a very limited degree to
persons who are not technical specialists. Generally speaking, the highest-
ranking career official is more likely to get his way in the long run than
his nominal superior, the cabinet minister, who is not a specialist.

Though by no means alone, the capitalistic system has undeniably
played a major role in the development of bureaucracy. Indeed, without
it capitalistic production, could not continue and ahy^ rational type of
socialism would have simply to take it over and increase its importance. ,
Its development, largely under capitalistic auspices, has created an urgent
need for stable, strict, intensive, and calculable administration. It is this
need which is so fateful to any kind of large-scale administration. Only
by reversion in every field — political, religious, economic, etc. — to small-
scale organization would it be possible to any considerable extent to
escape its influence. On the one hand, capitalism in its modern stages
of development requires the bureaucracy, though both have arisen from
different historical sources. Conversely, capitalism is" the most rational
economic basis for bureaucratic administration and .enables it to develop
in the most rational form, especially because, from a fiscal point of view,
it supplies the necessary money resources.

Along with these fiscal conditions of efficient bureaucratic administra-
tion, there are certain extremely important conditions in the fields of
communication and transportation. The precision of its functioning re-
quires the services of the railway, the telegraph, and the telephone, and
becomes increasingly dependent on them- A socialistic form of organiza-
tion would not alter this fact. It would be a question (cf. ch. II, sec. 12)

» ] Legal Authority With a Bureaucratic Staff 225

whether in a socialistic system it would be possible to provide conditions
for carrying out as stringent a bureaucratic organization as has been
possible in a capitalistic order. For socialism would, in fact, require a still
higher degree of formal bureaucratization than capitalism. If this should
prove not to be possible, it would demonstrate the existence of another
of those fundamental elements of irrationality — a conflict between
formal and substantive rationality of the sort which sociology so often
encounters.

Bureaucratic administration means fundamentally domination through
knowledge. This is the feature of it which makes it specifically rational.
This consists on the one hand in technical knowledge which, by itself, is
sufficient to ensure it a position of extraordinary power. But in addition
to this, bureaucratic organizations, or the holders of power who make use
of them, have the tendency to increase their power still further by the
knowledge growing out of experience in the service. For they acquire
through the conduct of office a special knowledge of facts and have
available a store of documentary material peculiar to themselves. While
not peculiar to bureaucratic organizations, the concept of "official secrets"
is certainly typical of them. It stands in relation to technical knowledge
in somewhat the same position as commercial secrets do to technological
training. It is a product of the striving for power.

Superior to bureaucracy in the knowledge of techniques and facts is
only the capitalist entrepreneur, within his own sphere of interest. He is
the or.ly type who has been able to maintain at least relative immunity
from subjection to the control of rational bureaucratic knowledge. In
large-scale organizations, all others are inevitably subject to bureaucratic
control just as they have fallen under the dominance of precision
machinery in the mass production of goods.

Ir general, bureaucratic domination has the following social conse-
quences :

(l) The tendency to "levelling' in the interest of the broadest pos-
sible basis of recruitment in terms of technical competence.

(j.) The tendency to plutocracy growing out of the interest in the
greatest possible length of technical training. Today this often lasts uo
to the age of thirty.

(j) The dominan.-e of a spirit of formalistic impersonality: "Si-^e
ira el studio" without hatred or passion, and hence without affection
or entnusiasm. The dominant norms are concepts of straightforward duty
without regard to personal considerations. Everyone is subject to formal
equa!;ty of treatment; that is, everyone in the same empirical situation.
This is the spirit in which the ideal official conducts his office.

2 2 6 THE TYPES OF LEGITIMATE DOMINATION [ Ch. Ill

The development of bureaucracy greatly favors the levelling of status,
and this can be shown historically to be the normal tendency. Con-
versely, every process of social levelling creates a favorable situation for
the development of bureaucracy by eliminating the office-holder who
rules by virtue of status privileges and the appropriation of the means
and powers of administration; in the interests of "equality," it also elimi-
nates those who can hold office on an honorary basis or as an avocation
by virtue of their wealth. Everywhere bureaucratization foreshadows
mass democracy, which will be discussed in another connection.

The "spirit" of rational bureaucracy has normally the following
general characteristics:

(i) Formalism, which is promoted by all the interests which are con-
cerned with the security of their own personal situation, whatever this
may consist in. Otherwise the door would be open to arbitrariness and
hence formalism is the line of least resistance.

(2) There is another tendency, "which is apparently, and in part
genuinely, in contradiction to the above. It is the tendency of officials
to treat their official function from what is substantively a utilitarian
point of view in the interest of the welfare of those under their authority.
But this utilitarian tendency is generally expressed in the enactment of
corresponding regulatory measures which themselves have a formal
character and tend to be treated in a formalistic spirit. (This will be
further discussed in the Sociology of Law). This tendency to substantive
rationality is supported by all those subject to authority who are not
included in the group mentioned above as interested in the protection
of advantages already secured. The problems which open up at this point
belong in the theory of "democracy."

Ill

Traditional Authority

6, The Pure Type

Authority will be called traditional if legitimacy is claimed for it and
believed in by virtue of the sanctity of age-old rules and powers- The
masters are designated according to traditional rules and are obeyed be-
cause of their traditional status (Eigenwurde) . This type of organized

Hi } __ Traditional Authority 227

rule is, in the simplest case, primarily based on personal loyalty which
results from common upbringing. The person exercising authority is not
a "superior," but a personal master, his administrative staff does not
consist mainly of officials but of personal retainers, and the ruled are
not "members" of an association but are either his traditional "comrades"
(sec. 7a) or his "subjects." Personal loyalty, not the official's impersonal
duty, determines the relations of the administrative staff to the master.

Obedience is owed not to enacted rules but to the person who oc-
cupies a position of authority by tradition or who has been chosen for it
by the traditional master. The commands of such a person are legitimized
.n one of two ways:

a) partly in terms of traditions which themselves directly determine
the content of the command and are believed to be valid within certain
limits that cannot be overstepped without endangering the master's
traditional status;

b) partly in terms of the master's discretion in that sphere which
tradition leaves open to him; this traditional prerogative rests primarily
on the fact that the obligations of personal obedience tend to be essen-
tially unlimited.

Thus there is a double sphere:

a) that of action which is bound to specific traditions;

b) that of action which is free of specific rules.

In the latter sphere, the master is free to dc good turns on the basis
of his personal pleasure and likes, particularly in return for gifts — the
historical sources of dues CGebiihTen'). So far as his action follows princi-
ples at all, these are governed by considerations of ethical common sense,
of equity or of utilitarian expediency. They are not formal principles, as
in the case of legal authority. The exercise of power is oriented toward the
consideration of how far master and staff can go in view of the subjects'
traditional compliance without arousing their resistance. When resistance
occurs, it is directed against the master or his servant personally, the ac-
cusation being that he failed to observe the traditional limits of his power.
Opposition is not directed against the system as- such — it is a case of
"traditionalist revolution."

In the pure type of traditional authority it is impossible for law or
administrative rule to be deliberately created by legislation. Rules which
in fact are innovations can he legitimized only by the claim that they
have been "valid of yore," but have only now been recognized by means
of "Wisdom" [the Weistutn of ancient Germanic law]. Legal decisions
as "finding of the law" (_Hechtsfindung) can refer only to documents -
of tradition, namely to precedents and earlier decisions.

12 8 THE TYPES OF LEGITIMATE DOMINATION [ Cfe. Ill

7. The Pure Type (Continued)

The master rules with or without an administrative staff. On the
latter case, see sec. 7a : I.

The typical administrative staff is recruited from one or more of the
following sources:

(I) From persons who are already related to the chief by traditional
ties of loyalty. This will be called patrimonial recruitment. Such persons
maybe

a) kinsmen,

b) slaves,

c) dependents who are officers of the household, especially
ministeriales,

d) clients,

e) coloni,

f) freedmen;

(II) Recruitment may be extra-patrimonial, including

a) persons in a relation of purely personal loyalty such as all sorts
of "favorites/'

b) persons standing in a relation of fealty to their lord (vassals),
and, finally,.

c) free men who voluntarily enter into a relation of personal
loyalty as officials.

On I.a) Under traditionalist domination it is very common For the
most important posts to be filled with members of the ruling family or clan. 1

b) In patrimonial administrations it is common for slaves and freed- *
men to rise even to the highest positions. It has not been rare for Grand
Viziers to have been at one time slaves.

c) The typical household officials have been the following: the sen-
echal, the marshal, the chamberlain, the carver (Truchsess), the major*
domo, who was the head of the service personnel and possibly of the
vassals. These are to be found everywhere in Europe. In the Orient, in
addition, the head eunuch, who was in charge of the harem, was partic-
ularly important, and in African kingdoms, the executioner. Further-
more, the ruler's, personal physician, the astrologer and similar persons
have been common.

d) In China and in Egypt, the principal source of recruitment for
patrimonial officials lay in the clientele of the king.

e) Armies of coloni have been known throughout the Orient and
were typical of the Roman nobility. (Even in modem times, in the
Mohammedan world, armies of slaves have existed.)

On Il.a) The regime of favorites is characteristic of every patrimo-
nial rule and has often been the occasion for traditionalist revolutions,
b) The vassals will be treated separately.

Hi ] _ Traditional Authority 229

c) Bureaucracy has first developed in patrimonial states with a body
of officials recruited from extra-patrimonial sources; but, as will be shown
soon, these officials were at first personal followers of their master.

* In the pure type of traditional rule, the following features of a
bureaucratic administrative staff are absent:

a) a clearly defined sphere of competence subject to impersonal
rules,

b) a rationally established hierarchy,

c) a regular system of appointment on the basis of free contract, and
orderly promotion, *

d) technical training as 2 regular requirement,

e) (frequently) fixed salaries, in the type case paid in money.

On a): In place of a well-defined functional jurisdiction, there is a
conflicting series of tasks and powers which at first are assigned at the
masters discretion. However, they tend to become permanent and are
often traditionally stereotyped. These competing functions originate
particularly in the competition for sources of income which are at the
disposal of the master himself and of his representatives. It is often in
the first instance through these interests that definite functional spheres
are first marked off and genuine administrative organs come into being.

At first, persons with permanent functions are household officials.
Their (extra-patrimonial) functions outside the administration of the
household are often in fields of activity which bear a relatively superficial
analogy to their household function, or which originated in a discretion-
ary act of the master and later became traditionally stereotyped. In ad-
dition to household officials, there have existed primarily only persons
with ad hoc commissions.

The absence of distinct spheres of competence is evident from a

perusal of the list of the titles of officials in any of the ancient Oriental

states. With rare exceptions, it is impossible to associate with these titles

- a set of rationally delimited functions which have remained stable over

a considerable period.

The process of delimiting permanent functions as a result of compe-
tition among and compromise between interests seeking favors, income,
and other forms of advantage is clearly evident in the Middle Ages.
This phenomenon has had very important consequences. The financial
interests of the powerful royal courts and of the powerful legal profes-
sion in England were largely responsible for vitiating or curbing the
influence of Roman and Canon law. In all periods the irrational division
of official functions has been stereotyped by the existence of an estab-
lished set of rights to fees and perquisites.

On b) : The question of who shall decide a matter or deal with ap-
peals — whether an agent shall be in charge of this, and which one, or

Z 3 O THE TYPES OF LEGITIMATE DOMINATION [ Ch. Ill

whether the master reserves decision for himself — is treated either tradi-
tionally, at times by considering the provenience of certain legal norms
and precedents taken over from the outside (.Oberhof-System);'* or
entirely on the basis of the master's discretion in such manner that all
agents have to yield to his personal intervention.

Next to the traditionalist system of the [precedent-setting outside]
"superior" court COberhof) we find the principle of Germanic law, de-
riving from the ruler's political prerogative, that in his presence the
jurisdiction of any court is suspended. The j«s evocandi and its modem
derivative, chamber justice (.Kabinettsjustiz*), stem from the same source
and the ruler's discretion. Particularly in the Middle Ages the Oberhof
was very often the agency whose writ declared and interpreted the law,
and accordingly the source from which the law of a given locality was
imported.

On c): The household" officials and favorites are often recruited in
a purely patrimonial fashion: they are slaves or dependents Qminis-
teriales) of the master. If recruitment has been extra-patrimonial, they
have tended to be benefice-holders whom he can freely remove. A funda-
mental change in this situation is first brought about by the rise of free
vassals and the filling of offices by a contract of fealty. However, since
fiefs are by no means determined by functional considerations, this does
not alter the situation with respect to a) and b) [the lack of definite
spheres of competence and clearly determined hierarchical relationships].
Except under certain circumstances when the administrative staff is organ-
ized on a prebendal basis, "promotion" is completely up to the master's
discretion (see sec. 8).

On d)r Rational technical training as a basic qualification for office
is scarcely to be found among household officials and favorites. However,
a fundamental change in administrative practice occurs wherever there
is even a beginning of technical training for appointees, regardless of
its content.

For some offices a certain amount of empirical training has been nec-
essary from very early times. This is particularly true of the art of read-
. ing and writing which was originally truly a rare "art." This has often,
most strikingly in China, had a decisive influence on the whole develop-
ment of culture through the mode of life of the literati. It eliminated
the recruiting of officials from intra-patrimonial sources and thus limited
the ruler's power by confronting him with a status group (cf . sec. 7a : in).

On e): Household officials and favorites are usually supported and
equipped in the master's household. Generally, their dissociation from
the lord's own table means the creation of benefices, at first usually
benefices in kind. It is easy for these to become traditionally stereotyped
in amount and kind. In addition, or instead of them, the officials who

Hi ] Traditional Authority 2 3 1

live outside the lord's household and the lord himself count on various
fees, which are often collected without any regular rate or scale, being
agreed upon from case to case with those seeking favors. (On the concept
of benefices see sec. 8.)

ya. Gerontocracy y Patriarchalism and Patrimonialism

I. Gerontocracy and 'primary patriarchalism are the most elementary'
types of traditional domination where the master has no personal ad-
ministrative staff.

The term gerontocracy is applied to a situation where so far as rule
over the group is organized at all it is in the hands of elders — which
originally /Was understood literally as the eldest in actual years, who are
the most^familiar with the sacred traditions. This is common in groups
which are not primarily of an economic or kinship character. "Patriar-
chalism" is the situation where, within 2 group (household) which is
usually organized on both an economic and a kinship basis, a particular
individual governs who is designated by a definite rule of inheritance.
Gerontocracy and patriarchalism are frequently found side bv side. The
decisive characteristic of both is the belief of the members that domina-
tion, even though it is an inherent traditional right of„the master, must
definitely be exercized as a joint right in the interest of all members and
is thus not freely appropriated by the incumbent. In order that this shall
be maintained, it is crucial that in both cases there is a complete absence
of a personal (patrimonial) staff. Hence the master is still largely de-
pendent upon the willingness of the members to comply with his orders
since he has no machinery to enforce them. Therefore, the members
(Genossen) are not yet really subjects (JJntertanen),

Their membership exists by tradition and not by enactment. Obedi-
ence is owed to the master, not to any enacted regulation. However, it
is owed to the master only by virtue of his traditional status. He is thus
on his part stricdy bound by tradition.

The different types of gerontocracy will be discussed later. Elemen-
tary patriarchalism is related to it in that the patriarch's authority car-
ries strict obligations to obedience only within his own household.
Apart From this, ;is in the case of the Arabian Sheik, it has onlv an ex-
emplary effect, in the manner cf charismatic authority, or must resort to
advice and similar means of exerting influence. ■*

II. Patrimonialism and, in the extreme case, sultanism tend to arise
whenever traditional domination develops an administration and a mili-
tary force which are purely personal instruments of the master. Onlv
then are the group members treated as subjects. Previously the master's

2 3 2 THE TYPES OF LEGITIMATE DOMINATION [ Ch. Ill

authority appeared as a pre-en.-aent group right, now it turns into his
persona] right, which he appropriates in the same way as he would any
ordinary object of possession. In principle, he can exploit his right like
any economic asset — sell it, pledge it as security, or divide it by inherit-
ance. The primary external support of patrimonial power is provided by
slaves (who are often branded), coloni and conscripted subjects, but also
by mercenary bodyguards and armies (patrimonial troops); the latter
practice is designed to maximize the solidarity of interest between master
and staff. By controlling these instruments the ruler can broaden the
range of his arbitrary power and put himself in a position to grant grace
and favors at the expense of the traditional limitations of patriarchal and
gerontocratic structures. Where domination is primarily traditional, even
though it'is exercised by virtue of the ruler's personal autonomy, it will
be crlled -patrimonial authority; where it indeed operates primarily on the
basis of discretion, it will be called sultanism. The transition is definitely
continuous. Both forms of domination are distinguished from elementary
patriarchalism by the presense of a personal staff.

Sometimes it appears that sultanism is completely unrestrained by
tradition, but this is never in fact the case. The non- traditional element
is not, however, rationalized in impersonal terms, but consists only in an
extreme development of the ruler's discretion. It is this which distin-
guishes it from every form of rational authority.

III. Estate-type domination Qstandische Herrschafty is that form of
patrimonial authority under which the administrative staff appropriates
particular powers and the corresponding economic assets. As in all similar
cases (cf. ch. II, sec. 19), appropriation may take the following forms:

a) Appropriation may be carried out by an organized group or by a
category of persons distinguished by particular characteristics, or

b) it may be carried out by individuals, for life, on a hereditary basis,
or as free property.

Domination of the estate-type thus involves:

a) always a limitation of the lord's discretion in selecting his adminis-
trative staff because positions or seigneurial powers have been appropri-

; ated by

<0 an organized group,

j3) a status group (see ch. IV), or

b) often — and this will be considered as typical— appropriation by
the individual staff members of

<0 the positions, including in general the economic advantages

associated with them,
/?) the material means of administration,
y) the governing powers.

Hi ] Traditional Authority z 3 3

Those holding appropriated positions may have originated historically
1 ) from members of an administrative staff which was not previously an
independent status group, or 2) before the appropriation, they may not
have belonged to the staff.

Where governing powers are appropriated, the costs of administration
are met indiscriminately from the incumbent's own and his appropriated
means. Holders of military powers and seigneurial members of the "feu-
dal" army (stdndisches Heer) equip themselves and possibly their own
patrimonial or feudal contingents. It is also possible that the provision
of administrative means and of the administrative staff itself is appropri-
ated as the object of a profit-making enterprise, on the basis of fixed
contributions from the ruler's magazines or treasury. This was true in
particular of the mercenary armies in the sixteenth and seventeenth cen-
tury in Europe — examples of "capitalist armies."

Where appropriation is complete, all the powers of government are
divided between the ruler and the administrative staff members, each
on the basis of his personal rights (Eigenrec/it); or autonomous powers
are created and regulated by special decrees of the ruler or special com-
promises with the holders of appropriated rights.

On 1): An example are the holders of court offices which have be-
come appropriated as fiefs. An example for 2) are seigneurs who ap-
propriated powers by virtue of their privileged position or by usurpation,
using the former as a legalization of the latter.

Appropriation by an individual may rest on

1. leasing,

2. pledging as security,

3. sale,

4. privileges, which may be personal, hereditary or freely appro-
priated, unconditional or subject to the performance of certain functions;
such a privilege may be

a) granted in return for services or for the sake of "buying"
compliance, or

b) it may constitute merely 'the formal recognition of actual
usurpation of powers;

5. appropriation by an organized group or a status group, usually a
consequence of a compromise between the ruler and his administrative
staff or between him and an unorganized status group; this may

a) leave the ruler completely or relatively free in his selection
of individuals, or

/?) it may lay down rigid rules for the selection of incumbents;

6. fiefs, a case which we must deal with separately.

234 ™ E TYPES OP LEGITIMATE DOMINATION . [ Ck. Ill

t. In the cases of gerontocracy and pure patriarchal ism, so far as
there are clear ideas on the subject at aH, the means of administration
are generally appropriated by the group as a whole or by the participat-
ing households. The administrative functions arc* performed on behalf
of the group as a whole. Appropriation" by the master personally is a
phenomenon of patrimonial ism. It may vary enormously in degree to the
extreme cases of a claim to full proprietorship of the land (Bodenregal)
and to the status of master over subjects treated as negotiable slaves.
Estate-type appropriation generally means the appropriation of at least
part of the means of administration by the members of the ndministrative
staff. In the case of pure patrimonial ism, there is complete separation
of the functionary from the means of carrying out his function. But ex-
actly the opposite is true of the estarStype of patrimonialism. The per-
son exercising governing powers has personal control of the means of
administration — if not all, at least of an important part of them. In full
possession of these means were the feudal knight, who provided his own
equipment, the count, who by virtue of holding his fief took the court
fees and other perquisites for himself and met his feudal obligations
from his own means (including the appropriated ones), and the Indian
jagirdar, who provided and equipped a miiitarv unit from the proceeds
of his tax benefice. On the other hand, a colonel who recruited a mer-
cenary regiment on his own accg&nt, but received certain payments
from the royal exchequer and covered his deficit cither by curtailing the
service or from booty or requisitions, was only partly in possession of
the means of administration and was subject jo certain regulations. By
contrast, the Pharaoh, who organized armies of slaves or coloni, put his
clients in command of them, and clothed, fed and equipped them from
his own storehouses, was acting #s a patrimonial lord in full personal
control of the means of administration. It is not always the formal mode *
of organization which is decisive. The Mamelukes were formally pur-
chased slaves. In fact, however, they monopolized the powers of govern-
ment as completely as any group" of minisieriales has ever monopolized
the service hefs.

There are examples of service land appropriated by a closed group
without any individual appropriation. Where this occurs, land may be
freelv granted to individuals by the lord as long as they are members of
the group (ease m:a:a) or the grant mav be subject to regulations
specifying qualifications (case m:a:/!t). Thus, military or possibly
ritual qualifications have been required of the. candidates, but once they
arc given, close blood relations have had priority. The situation is simi-
lar in the case of manorial or guild artisans or of peasants whose services
have been attached for military or administrative purposes.

2. Appropriation by lease, especially tax farming, by pledging as
security, or by sale, have been found in the Occident, but also in the
Orient and in India. In Antiquity, it was not un.ommon for priest-
hoods to be sold at auction; : In the case of leasing, the aim has been
partly a practical financial one to meet stringencies caused especially by
the costs of war. It has partly also been a matter of the technique of

Hi ] Traditional Authority 235

financing, to insure a stable money income available for budgetary uses.
Pledging as security and sale have generally arisen from the first aim.
In the Papal States the purpose was also the creation of rents for neph-
ews (Nepotearewten), Appropriation by pledging played a significant
role in France as late as the -eighteenth century in filling judicial posts
in the yarUments. The appropriation of officers' commissions by reg-
ulated purchase continued in the British army well into the nineteenth
century. Privileges, as a sanction of usurpation, as a reward, or as an
incentive for political services, were common in the Middle Ages in Eu-
rope as well as elsewhere.

8. Patrimonial Maintenance: Benefices and Fiefs

The patrimonial retainer may receive his support in any of the fol-
lowing ways:

a) by living from the lord's table,
, b) by allowances (usually in kind) from the lord's magazines or
treasury,

c) by rights of land use in return for services ("service-land"),

d) by the appropriation of property income, fees or taxes,
- e) by fiefs.

We shall speak of benefices insofar as the forms , of maintenance
b) through d) are always newly granted in a traditional fashion which
determines amount or locality, and insofar as they can be appropriated
by"the individual, although not hereditarily. When an administrative
staff is, in principle, supported in this form, we shall speak of prehendal-
ism. In such a situation there may be a system of promotion on a basis of
seniority or of particular objectively determined achievements, and it may
also happen that a certain social status and hence a sense of status honor
Qitandesehre) are required as a criterion of eligibility. (On the concept
of the status group : Stand, see ch. IV.)

Appropriated seigneurial powers will be called a fief if they are
granted primarily to particular qualified individuals by a contract and
if the reciprocal rights and duties involved are primarily oriented to
conventional standards of status honor, particularly in a military sense.
If an administrative staff is primarily supported by fiefs, we will speak
of [Western] feudalism CLehensfeudaltsmus').

The transition between fiefs and military benefices is so gradual that
at times they are almost indistinguishable. (This will be further dis-
cussed below in ch. IV.)

In cases d) and e), sometimes also in c), the: irjdivirjual who has ap-
propriated governing powers pays the cost of his administration, possibly

2 3 6 THE TYPES OF LEGITIMATE DOMINATION [ Ch, Ill

of military equipment, in the manner indicated above, from the proceeds
of his benefice or fief. His own authority may then become patrimonial
(hence, hereditary, alienable, and capable of division by inheritance.)

i. The earliest form of support for royal retainers, household offi-
cials, priests and other types of patrimonial (for example, manorial)
retainers has been their presence at the lord's table or their support by
discretionary allowances from his stores. The "men's house," which is
the oldest form of professional military organizations — to be dealt with
later — , very often adheres to the consumptive household communism of
a ruling stratum. Separation from the table of the lord (or of the temple
or cathedral) and the substitution of allowances or service-land has by
no means always been regarded with approval. It has, however, usually
resulted from the establishment of independent families. Allowances in
kind granted to such temple priests and officials constituted the original
form of support of officials throughout the Near East and also existed
in China, India, and often in the Occident. The use of land in retum
for military service is found throughout the Orient since early Antiquity,
and also* in medieval Germany, as a means of providing for ministeriales,
manorial officials and other functionaries. The income sources of the
Turkish if ahis, the Japanese samurai, and various similar types of Orien-
tal retainers and knights are, in the present terminology, "benefices"
and not "fiefs," as will be pointed out later. In some cases they have been
derived from the rents of certain lands; in others, from the tax income
of certain districts. In the latter case, they have generally been combined
with appropriation of governmental powers in the same district. The
concept of the fief can be further developed only in relation to that of
the state. Its object may be a manor — a form of patrimonial domination
— or it may be any of various kinds of claims to property income and
tees.

2. The appropriation of property income and rights to fees and the
proceeds of taxes in the form of benefices and fiefs of all sorts is wide-
spread. In India, particularly, it became an independent and highly
developed practice. The usual arrangement was the granting of rights
to these sources of income in retum for the provision of military con-
tingents and the payment of administrative costs.

9. Estate-Type Domination and Its Division of Powers

In the pure type, patrimonial domination, especially of the estate-
type, regards all governing powers and the corresponding economic rights
as privately appropriated economic advantages. This does not mean that
these powers are qualitatively undifferentiated. Some important ones are
appropriated in a form subject to special regulations. In particular, the
appropriation of judicial and military powers tends to he treated as a
legal basis for a privileged status position of those appropriating them, as

Hi ] Traditional Authority 2 3 7

compared to the appropriation of purely economic advantages having to
do with the income from domains, from taxes, or perquisites. Within
the latter category, again, there tends to be a differentiation of those
which are primarily patrimonial from those which are primarily extra-
patrimonial or fiscal in the mode of appropriation. For our terminology
the decisive fact is that, regardless of content, governing powers and the
related emoluments are treated as private rights.

In his Der deutsche Stoat des Mittelalters, von Below is quite right
in emphasizing that the appropriation of judicial authority was singled
out and became a source of privileged status, and that it is impossible to
prove that the medieval political organization had either a purely patri-
monial or a purely feudal character. Nevertheless, so far as judicial
authority and other rights of a purely political origin are treated as
private rights, it is for present purposes terminologically correct to speak
of patrimonial domination. The concept itself, as is well known, has
been most consistently developed by Haller in his Restauratum der
Staatswissenschaften. Historically there has never been a purely patri-
monial state. 8

IV. We shall speak of the estate-type division of powers Qstimdisohe
Gewaltenteilung) when organized groups of persons privileged by ap-
propriated seigneurial powers conclude compromises with their ruler. As •
the occasion warrants, the subject of such compromises may be political
or administrative regulations, concrete administrative decisions or super-
visory measures. At times the members of such groups may participate
directly on their own authority and with their own staffs.

1. Under certain circumstances, groups, such as peasants, which
do not enjoy a privileged social position, may be included. This does
not, however, alter the concept. For the decisive point is the fact that
the members of the privileged group have independent rights. If socially
privileged groups were absent, the case would obviously belong under
another type.

2. The type case has been fully developed only in the Occident. We
must deal separately and in detail with its characteristics and with the
reasons for its development.

3. As a rule, such a status group did not have an administrative
staff of its own, especially not one with independent governing powers.

ga. Traditional Domination and the Economy

The primary effect of traditional domination on economic activities
is usually in a very general way to strengthen traditional attitudes. This
is most conspicuous under gerontooatic and purely patriarchal domina-
tion, which cannot use an administrative machinery against the members

2 3§ THE TYPES OF LEGITIMATE DOMINATION [ Ck. HI

of the group and hence is strongly dependent for its own legitimacy
upon the safeguarding of tradition in every respect.

I. Beyond this, the typical mode of financing a traditional structure
of domination affects the economy (cf. ch. II, sec. 38). In this respect,
patrimonialism may use a wide variety of approaches. The following,
however, are particularly important:

A. An oikos maintained by the ruler where needs are met on a
liturgical basis wholly or primarily in kind (in the form of contributions
and compulsory services). In this case, economic relationships tend to
be strictly tradition-bound. The development of markets is obstructed,
the use of money is primarily consumptive, and the development of
capitalism is impossible.

B. Provisioning the services of socially privileged groups has very
similar effects. Though not necessarily to the same extent, the develop-
ment of markets is also limited in this case by the fact that the property
and the productive capacity of the individual economic units are largely
pre-empted for the ruler's needs.

C. Furthermore, patrimonialism can resort to monopolistic want satis-
faction, which in part may rely on profit-making enterprises, fee-taking
or taxation. In this case, the development of markets is, according to the
type of monopolies involved, more or less seriously limited by irrational
factors. The important openings for profit are in the hands of the ruler
and of his administrative staff. Capitalism is thereby either directly ob-
structed, if the ruler maintains his own administration, or is diverted
into political capitalism, if there is tax farming, leasing or sale of offices,
and capitalist provision for armies and administration (see ch. II, sec. 31).

Even where it is carried out in money terms, the financing of pa-
trimonialism and even more of sultanism tends to have irrational con-
sequences for the following reasons:

i ) The obligations placed on sources of direct taxation tend both in
amount and in kind to remain bound to tradition. At the same time
there is complete freedom — and hence arbitrariness — in the determina-
tion of a) fees and b) of newly imposed obligations, and c) in the
organization of monopolies. This element of arbitrariness is at leas;
claimed as a right. It is historically most effective in case a), because the
lord and his staff must be asked for the "favor" of action, far less effec-
tive in case b), and of varying effectiveness in case c).

2) Two bases of the rationalization of economic activity are entirely
lacking; namely, a basis for the calculability of obligations and of the
extent of freedom which will be allowed to private enterprise.

D. In individual cases, however, patrimonial fiscal policy may have a

in ] Traditional Authority 2 3 9

rationalizing effect by systematically cultivating its sources of taxation
and by organizing monopolies rationally. This, however, is "accidental"
and dependent on specific historical circumstances, some of which existed
in the Occident.

If there is estate-type division of powers, fiscal policy tends toJ>e- a
result of compromise. This makes the burdens relatively predictable and
eliminates or at least sharply limits the ruler's powers to impose new
burdens and, above all, to create monopolies. Whether the resulting
fiscal policy tends to promote or to limit rational economic activity de-
pends largely on the type of ruling group; primarily, it depends on
whether it is a feudal or a patrician stratum. The dominance of the
feudal stratum tends, because the structure of feudalized powers of gov-
ernment is normally patrimonial, to set rigid limits to the freedom 06
acquisitive activity and the development of markets. It may even involve
deliberate attempts to suppress them to protect the power of the feudal
stratum, The predominance of a patrician [urban] stratum may have the
opposite effect.

< i; What has been said above must suffice for the present. It will be
necessary to return to these questions repeatedly in different connec-
tions. .

%. Examples for IA): the oikos of ancient Egypt and in India; IB):
large parti or the Hellenistic world, thedate Roman Empire, China, In-
dia, to some extent Russia and the Islamic states; IC): Ptolemaic Egypt,
to some extent the Byzantine Empire, and in a different way the regime
of the Stuarts in England; ID): the Occidental patrimonial states in
the period of "enlightened despotism," especially Colbert's policies.

II. It is not only the financial policy of most, patrimonial ngimes
which tends to restrict the development of rational economic activity, but
above all the general character of their administrative practices. This a
true in the following respects:

a) Traditionalism places serious obstacles in the way of formally
rational regulations, which can be depended upon to remain stable and
hence are calculable in their economic implications and exploitability.

b) A staff of officials with formal technical training is typically absent

(The fact that it developed in the patrimonial states of the Occident
is, as will be shown, -accounted for by unique conditions. This stratum
developed for the most part out of sources wholly different from the
general structure of patrimonialara.)

c) There is a wide scope for actual arbitrariness and the expression of
purely personal whims on the part of the ruler and the members of his
administrative staff.' The opening for bribery and corruption, which is

240 THE TYPES OF LEGITIMATE DOMINATION [ Ch. Ill

simply a matter of the disorganization of an unregulated system of fees,
would be the least serious effect of this if it remained a constant quantity,
because then it would become calculable in practice. But it tends to be
a matter which is setded from case to case with every individual official
and thus highly variable. If offices are leased, the incumbent is put in a
position where it is to his immediate interest to get back the capital he
has invested by any available means of extortion, however irrational.

d) Patriarchal ism and patrimonialism have an inherent tendency to
regulate economic activity in terms of utilitarian, welfare or absolute
values. This tendency stems from the character of the claim to legitimacy
and the interest in the contentment of the subjects. It breaks down the
type of format rationality which is oriented to a technical legal order.
This type of influence is decisive in the case of hierocratic patrimonialism.
In the case of pure sultanism, on' the other hand, it is fiscal arbitrariness
which is likely to be most important.

For all these reasons, under the dominance of a patrimonial regime
only certain types of capitalism are able to develop:

a) capitalist trading,

b) capitalist tax farming, lease and sale of offices,

c) capitalist provision of supplies for the state and the financing of
wars,

d) under certain circumstances, capitalist plantations and other colo-
nial enterprises.

All these forms are indigenous to patrimonial regimes and often reach
a very high level of development. This is not, however, true of the type
of profit-making enterprise with heavy investments in fixed capital and a
rational organization of free labor which is oriented to the market pur-
chases of private consumers. This type of capitalism is altogether too
sensitive to all sorts of irrationalities in the administration of law, ad-
ministration and taxation, for these upset the basis of adculahility.

The situation is fundamentally different only in cases where a patri-
monial ruler, in the interest of his own power and financial provision,
develops a rational system of administration with technically specialized
officials. For this to happen, it is necessary 1) that technical training
should be available; 2) there must be a sufficiently powerful incentive
to embark on such a policy — usually the sharp competition between a
plurality of patrimonial powers within the same cultural area; 3) a very
special factor is necessary, namely, the participation of urban communes
as a financial support in the competition of the patrimonial units.

1, T

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